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This clause clarifies the treatment of machinery
and plant capital allowances where both the special rules for
fixtures and for hire-purchase could apply, and provides for the
special rules for fixtures to take precedence.
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A person cannot claim capital allowances on their
expenditure on machinery or plant unless it belongs them. There
are special rules that can deem machinery or plant to belong to
a person other than the legal owner, if the machinery or plant
is a fixture or subject to a hire-purchase contract. They enable
a person who incurs expenditure on the machinery or plant to claim
capital allowances, even though he or she is not the legal owner.
The clause will apply to the rare cases where the special rules
for fixtures and hire purchase could both have effect.
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DETAILS OF THE CLAUSE
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Subsection (1) inserts a new subsection
(4) into Section 60 Capital Allowances Act 1990. This makes
the existing rules regarding hire purchase etc contracts subject
to a new Section 60A.
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Subsection (2) inserts a new Section 60A
into the Capital Allowances Act 1990.
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Section 60A(1) confirms that the rules for fixtures
take precedence where a hire-purchase agreement is entered into
for machinery or plant which is fixture.
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Section 60A(2) provides that, if machinery or
plant which is treated as belonging to a person by the special
rules for hire-purchase subsequently becomes a fixture, the rules
for fixtures take precedence from the time of affixation. This
means that the machinery or plant will be treated as ceasing to
belong to the person at the time it becomes a fixture, unless
it is also deemed to belong to that person under the fixtures
rules.
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Subsection (3) treats the rule in new Section
60A(1) as always having had effect. The rule in new Section 60A(2)
applies to machinery or plant that becomes a fixture after Royal
Assent.
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BACKGROUND
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One condition that must be met for a claim to
capital allowances on expenditure on machinery and plant is that
the machinery and plant must belong to the claimant.
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The special rules for fixtures apply where machinery
and plant is fixed in or to a building or any other land so as
to become, in law, part of the building or land. They set out
a comprehensive code to determine to whom the fixtures are deemed
to belong, and thus who is entitled to claim capital allowances.
Broadly speaking, if a person incurs capital expenditure on the
provision of a machinery or plant fixture, it is treated as belonging
to that person even if legal ownership lies elsewhere.
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The special rules for hire-purchase apply where
a person enters into a contract under which that person shall
or may become the owner of the machinery or plant on the performance
of the contract. The rules treat the machinery or plant as belonging
to that person for capital allowances purposes from the time he
or she enters into the contract, even though it does not, in law,
belong to that person at that time.
