-
This clause abolishes the requirement to notify
expenditure on which machinery and plant capital allowances are
claimed, with effect from 1 April 2000.
___________________
DETAILS OF THE CLAUSE
-
Subsection (1) amends section 118 Finance
Act 1994, which imposed the notification requirement.
-
Subsection (1)(a) repeals section 118(1)
to (5) and (7) to (9). This removes the notification requirement.
-
Subsection (1)(b) makes consequential amendments
to section 118(6), which continues to have effect as before. Section
118(6) limits the extent to which expenditure on machinery or
plant that has not been added to the capital allowances pool for
the chargeable period in which it first qualifies may be added
to the pool for a later chargeable period. It prevents expenditure
from being added to the pool for a later chargeable period if
the asset has ceased to belong to the taxpayer before the start
of that period.
-
Subsection (2) provides that these changes
apply to chargeable periods for which the time limit for notification
ends on or after 1 April 2000, that is for chargeable periods
ending on or after 1 April 1998 for corporation tax or 6 April
1998 for income tax.
_________________
BACKGROUND
-
Clauses 70 to 75, 77 and 78 modernise and
simplify the capital allowance system in advance of the first
Tax Law Rewrite Bill, which is planned to be ready for introduction
in Parliament later in 2000. The Bill will rewrite the legislation
on capital allowances to make it clearer and easier to use.
-
Notification was introduced in 1994 to protect
the Exchequer and to prevent windfall gains for some taxpayers
if challenges that were being made by some taxpayers to the accepted
scope of machinery and plant allowances were successful.
-
Notification required expenditure on which machinery
and plant capital allowances may be claimed for a chargeable period
to be notified to the Inland Revenue within a fixed time limit,
broadly two years from the end of that period. Expenditure that
had not been notified within the time limit could not be added
to the pool, and thus included in claims to capital allowances,
for that period. It could nevertheless be added for a later period
if notification was given within the time limit for that later
period and the asset continued to belong to the taxpayer in that
later period.
-
The risk to the Exchequer has been greatly reduced
through legislation (Schedule AA1 Capital Allowances Act 1990)
and decisions of the Courts (Gray v Seymours Garden Centre, Attwood
v Anduff Car Wash) which confirmed the previous understanding
of the scope of machinery and plant allowances.
-
The repeal of notification, which is effective
for chargeable periods ending on or after 1 April 1998 for corporation
tax or 6 April 1998 for income tax, goes back as early as is possible
without retrospectively changing entitlement to capital allowances.
