Finance Act, 2000

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Interpretation (Chapter 4).

769A.—(1) In this Chapter—

‘capacity rights’ means the right to use wired, radio or optical transmission paths for the transfer of voice, data or information:

‘writing-down period’ has the meaning assigned to it by section 769B(2).

(2) In this Chapter, any reference to the sale of part of capacity rights includes a reference to the grant of a licence in respect of the capacity rights in question, and any reference to the purchase of capacity rights includes a reference to the acquisition of a licence in respect of capacity rights; but, if a licence granted by a company entitled to any capacity rights is a licence to exercise those rights to the exclusion of the grantor and all other persons for the whole of the remainder of the term for which the rights subsist, the grantor shall be treated for the purposes of this Chapter as thereby selling the whole of the rights.

Annual allowances for capital expenditure on purchase of capacity rights.

769B.—(1) Where, on or after 1 April 2000, a company incurs capital expenditure on the purchase of capacity rights, there shall, subject to and in accordance with this Chapter, be made to that company writing-down allowances, in respect of that expenditure during the writing-down period; but no writing-down allowance shall be made to a company in respect of any expenditure unless—

(a) the allowance is to be made to the company in taxing the company's trade, or

(b) any income receivable by the company in respect of the rights would be liable to tax.

(2) (a) Subject to paragraph (c), the writing-down period shall be—

(i) a period of 7 years, or

(ii) where the capacity rights are purchased for a specified period which exceeds 7 years, the number of years for which the capacity rights are purchased,

commencing with the beginning of the accounting period related to the expenditure.

(b) For the purposes of this section, writing-down allowances shall be determined by the formula—

A x

C

where—

A is the amount of the capital expenditure incurred on the purchase of the capacity rights,

B is the length of the part of the chargeable period falling within the writing-down period, and

C is the length of the writing-down period.

(c) For the purposes of this subsection, any expenditure incurred for the purposes of a trade by a company about to carry on the trade shall be treated as if that expenditure had been incurred by that company on the first day on which that company carries on the trade unless before that day the company has sold all the capacity rights on the purchase of which the expenditure was incurred.

Effect of lapse of capacity rights.

769C.—(1) Where a company incurs capital expenditure on the purchase of capacity rights and, before the end of the writing-down period, any of the following events occurs—

(a) the rights come to an end without provision for their subsequent renewal or the rights cease altogether to be exercised;

(b) the company sells all those rights or so much of them as it still owns;

(c) the company sells part of those rights and the amount of net proceeds of the sale (in so far as they consist of capital sums) are not less than the amount of the capital expenditure remaining unallowed;

no writing-down allowance shall be made to that company for the chargeable period related to the event or for any subsequent chargeable period.

(2) Where a company incurs capital expenditure on the purchase of capacity rights and, before the end of the writing-down period, either of the following events occurs—

(a) the rights come to an end without provision for their subsequent renewal or the rights cease altogether to be exercised;

(b) the company sells all those rights or so much of them as it still owns, and the amount of the net proceeds of the sale (in so far as they consist of capital sums) are less than the amount of the capital expenditure remaining unallowed;

there shall, subject to and in accordance with this Chapter, be made to that company for the accounting period related to the event an allowance (in this Chapter referred to as a ‘balancing allowance’) equal to—

(i) if the event is one referred to in paragraph (a), the amount of the capital expenditure remaining unallowed, and

(ii) if the event is one referred to in paragraph (b), the amount of the capital expenditure remaining unallowed less the amount of the net proceeds of the sale.

(3) Where a company which has incurred capital expenditure on the purchase of capacity rights sells all or any part of those rights and the amount of the net proceeds of the sale (in so far as they consist of capital sums) exceeds the amount of the capital expenditure remaining unallowed, if any, there shall, subject to and in accordance with this Chapter, be made on that company for the chargeable period related to the sale a charge (in this Chapter referred to as a ‘balancing charge’) on an amount equal to—

(a) the excess, or

(b) where the amount of the capital expenditure remaining unallowed is nil, the amount of the net proceeds of the sale.

(4) Where a company which has incurred capital expenditure on the purchase of capacity rights sells a part of those rights and subsection (3) does not apply, the amount of any writing-down allowance made in respect of that expenditure for the chargeable period related to the sale or any subsequent chargeable period shall be the amount determined by—

(a) subtracting the amount of the net proceeds of the sale (in so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale, and

(b) dividing the result by the number of complete years of the writing-down period which remained at the beginning of the chargeable period related to the sale,

and so on for any subsequent sales.

(5) References in this section to the amount of any capital expenditure remaining unallowed shall in relation to any event aforesaid be construed as references to the amount of that expenditure less any writing-down allowances made in respect of that expenditure for chargeable periods before the chargeable period related to that event, and less also the amount of the net proceeds of any previous sale by the company which incurred the expenditure of any part of the rights acquired by the expenditure, in so far as those proceeds consist of capital sums.

(6) Notwithstanding subsections (1) to (5)—

(a) no balancing allowance shall be made in respect of any expenditure unless a writing-down allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and

(b) the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.

Manner of making allowances and charges.

769D.—(1) An allowance or charge under this Chapter shall be made to or on a company in taxing the company's trade if—

(a) the company is carrying on a trade the profits or gains of which are or, if there were any, would be, chargeable to corporation tax for the chargeable period for which the allowance or charge is made, and

(b) at any time in the chargeable period or its basis period the capacity rights in question, or other rights out of which they were granted, were used for the purposes of that trade.

(2) Except where provided for in subsection (1), an allowance under this Chapter shall be made by means of discharge or repayment of tax and shall be available against income from capacity rights, and a charge under this Chapter shall be made under Case IV of Schedule D.

Application of Chapter 4 of Part 9.

769E.—(1) Subject to subsection (2), Chapter 4 of Part 9 shall apply as if this Chapter were contained in that Part, and any reference in the Tax Acts to any capital allowance to be given by means of discharge or repayment of tax and to be available or available primarily against a specified class of income shall include a reference to any capital allowance given in accordance with section 769D(2).

(2) In Chapter 4 of Part 9, as applied by virtue of subsection (1) to capacity rights, the reference in section 312(5)(a)(i) to the sum mentioned in paragraph (b) shall in the case of capacity rights be construed as a reference to the amount of the capital expenditure on the acquisition of the capacity rights remaining unallowed, computed in accordance with section 769C.

Commencement (Chapter 4).

769F.—This Chapter shall come into operation on such day as the Minister for Finance may, by order, appoint.”.