Finance Act 2011
|
Amendment of Part 12 (principal provisions relating to loss relief, treatment of certain losses and capital allowances, and group relief) of Principal Act. |
23.— (1) Part 12 of the Principal Act is amended by inserting the following after Chapter 4: | |
“Chapter 4A | ||
Limits on certain losses | ||
Interpretation and general (Chapter 4A). | ||
409F.— (1) This Chapter applies notwithstanding any other provision of the Tax Acts. | ||
(2) In this Chapter— | ||
‘active partner’ has the same meaning as in section 409A; | ||
‘active trader’ has the same meaning as in section 409D; | ||
‘area-based capital allowance’ means any allowance made under Chapter 1 of Part 9 as that Chapter is applied— | ||
(a) by section 323, 331, 332, 341, 342, 343, 344, 352, 353, 372C, 372D, 372M, 372N, 372V, 372W, 372AC or 372AD for a chargeable period, or | ||
(b) by virtue of paragraph 11 of Schedule 32 for a chargeable period, | ||
including any such allowance made for a previous chargeable period and carried forward from that previous chargeable period in accordance with Part 9; | ||
‘balancing allowance’ means any allowance made under section 274; | ||
‘capital allowance’ means any allowance, or part of any allowance, specified in the definition of ‘specified capital allowance’ or ‘area-based capital allowance’; | ||
‘chargeable period’ has the same meaning as in section 321 and a reference to a chargeable period or its basis period shall be construed in accordance with subsection (2) of that section; | ||
‘relevant day’ shall be read in accordance with subsection (3); | ||
‘relevant interest’ has the same meaning as in section 269; | ||
‘residue of expenditure’ shall be construed in accordance with section 277; | ||
‘specified amount of rent’, in relation to a building or structure and a person for a chargeable period, means the amount of the surplus in respect of the rent from the building or structure to which the person becomes entitled for the chargeable period, as computed in accordance with section 97(1); | ||
‘specified capital allowance’ means any specified relief that is— | ||
(a) a writing down allowance made for a chargeable period, | ||
(b) a balancing allowance made for a chargeable period, or | ||
(c) an allowance made under Chapter 1 of Part 9 as that Chapter is applied by section 372AX, 372AY, 843 or 843A for a chargeable period, | ||
including any such allowance or part of such allowance made for a previous chargeable period and carried forward from that previous chargeable period in accordance with Part 9; | ||
‘specified relief’ has the same meaning as in section 485C; | ||
‘tax year’ means a year of assessment; | ||
‘writing down allowance’ means any allowance made under section 272 and includes any such allowance as increased under section 273. | ||
(3) The Minister for Finance may by order appoint a day (in this Chapter referred to as the ‘relevant day’) to be the day on which this Chapter comes into effect, which day shall not in any case be earlier than 60 days after the publication of the impact assessment referred to in page B.8 of the Summary of 2011 Budget measures published by the Department of Finance on 7 December 2010. | ||
Restriction of capital allowances. | ||
409G.— (1) As respects any tax year, the amount, in relation to a building or structure, of any specified capital allowance that is carried forward in accordance with section 304 or 305 to that tax year or any subsequent tax year, being a tax year that is— | ||
(a) 7 years after the year in respect of which such a capital allowance was first made in relation to the building or structure, in a case where the first such allowance was made at a rate equal to 15 per cent, or | ||
(b) 10 years after the year in respect of which such a capital allowance was first made in relation to the building or structure, in a case where the first such allowance was made at a rate equal to 10 per cent, | ||
shall, subject to subsection (6), be zero for all the purposes of the Tax Acts. | ||
(2) The amount, in relation to a building or structure, of any specified capital allowance that— | ||
(a) is available to be carried forward, in accordance with section 308(3), to any accounting period, or | ||
(b) may, in accordance with section 308(4), be set against the profits of an accounting period preceding any accounting period to which paragraph (a) applies, | ||
being an accounting period that begins— | ||
(i) 7 years after the year in respect of which a capital allowance was first made in relation to the building or structure, in a case where the first such allowance was made at a rate equal to 15 per cent, or | ||
(ii) 10 years after the year in respect of which a capital allowance was first made in relation to the building or structure, in a case where the allowance was made at a rate equal to 10 per cent, | ||
shall be zero for all the purposes of the Tax Acts. | ||
(3) As respects any chargeable period— | ||
(a) the amount of any area-based capital allowance, other than such an allowance made under section 274, for a chargeable period (in this subsection referred to as the ‘first-mentioned chargeable period’) to be made in relation to a building or structure shall, instead of being determined in accordance with the provisions of the Tax Acts as they applied immediately before the relevant day and subject to paragraph (c), be an amount determined in accordance with paragraph (b), | ||
(b) the amount referred to in paragraph (a) is an amount given by the formula— | ||
A × 1 | ||
B | ||
where— | ||
A is the residue of expenditure calculated as if the relevant interest in the building or structure had been sold on the last day of the chargeable period or its basis period that immediately preceded the first-mentioned chargeable period, and | ||
B is the number of years or accounting periods, as the case may be, remaining in the period of 7 years beginning with the year or accounting period in which a capital allowance was first made in relation to that building or structure, | ||
(c) the amount of any area-based capital allowance to be made in relation to a building or structure, including any allowance made in accordance with paragraph (a), shall, for all the purposes of the Tax Acts, be reduced, subject to subsection (6), to an amount that is equal to 80 per cent of what that allowance would otherwise be if this paragraph did not have effect, and | ||
(d) where paragraph (c) applies in respect of any capital allowance it shall not apply again as respects that allowance or any part of that allowance that is carried forward in accordance with section 303, 304 or 308, as the case may be, to any other chargeable period that falls into the remaining period referred to in the meaning of ‘B’ in the formula in paragraph (b). | ||
(4) As respects any tax year— | ||
(a) the amount of any area-based capital allowance to be made in relation to a building or structure, and | ||
(b) the amount of any area-based capital allowance in relation to a building or structure to be carried forward in accordance with section 304 or 305, as those provisions are applied or modified by any other provision of the Tax Acts, | ||
shall, subject to subsection (6), be zero for all the purposes of the Tax Acts where the allowance is made for, or carried forward to, a tax year that is 7 years after the tax year in respect of which a capital allowance was first made in relation to that building or structure. | ||
(5) For all the purposes of the Tax Acts— | ||
(a) the amount of any area-based capital allowance to be made in relation to a building or structure, | ||
(b) the amount of any such allowance that is available to be carried forward in accordance with section 308(3) to any accounting period, or | ||
(c) the amount of any such allowance that may be set, in accordance with section 308(4), against the profits of an accounting period preceding any accounting period to which paragraph (a) applies, | ||
shall be zero where the allowance is made for, or carried forward to, an accounting period that is 7 years after the accounting period in respect of which a capital allowance was first made in relation to that building or structure or is available for setting against the profits of a preceding accounting period that is 6 years after the accounting period in respect of which a capital allowance was first made in relation to that building or structure. | ||
(6) (a) Subsections (1), (3) and (4) shall not apply to an individual where any specified capital allowance or area-based capital allowance is made in taxing a trade in relation to which trade the individual is an active partner or an active trader. | ||
(b) Subsection (3) shall not apply to a company where any specified capital allowance or area-based capital allowance is made in taxing that company’s trade. | ||
Restriction on use of capital allowances. | ||
409H.— (1) As respects any tax year, in the case of an individual who carries on a trade, including a trade carried on by 2 or more individuals in partnership, otherwise than as an active trader or an active partner, where a capital allowance, in relation to a building or structure, is made to the individual either in taxing that trade or by means of discharge or repayment of tax to which the individual is entitled by reason of the individual carrying on the trade concerned, then— | ||
(a) the capital allowance shall be made to the individual only in computing the income or profits from the trade concerned, and | ||
(b) the capital allowance shall not be made in computing any other income or profits or in taxing any other trade or in charging any other income to tax. | ||
(2) As respects any chargeable period, in computing the amount of profits or gains for the purposes of Case V of Schedule D— | ||
(a) any capital allowance in respect of a building or structure to be made to a person— | ||
(i) shall not exceed the specified amount of rent from the building or structure for that chargeable period, | ||
(ii) shall be made in charging the specified amount of rent under Case V of Schedule D for that chargeable period, and | ||
(iii) shall be available in charging the specified amount of rent, | ||
(b) section 278 shall apply with any modifications necessary to give effect to paragraph (a), and | ||
(c) section 305(1)(c) shall apply in relation to a capital allowance to be made in accordance with paragraph (a). | ||
(3) Notwithstanding any other provisions of this Part, and as respects the tax year or accounting period, as the case may be, in which the relevant day occurs, any capital allowance in relation to a building or structure shall not be made— | ||
(a) in charging profits or gains of a trade to income tax, other than the profits or gains of the trade referred to in subsection (1)(a), or | ||
(b) in charging any amount of rent under Case V of Schedule D, other than in charging the specified amount of rent, | ||
where the profits or gains arise, or that rent arises, in the period beginning on the relevant day and ending on the last day of the tax year or the accounting period concerned.”. | ||
(2) Subsection (1) applies as on and from the relevant day (within the meaning of section 409F(3) (inserted by subsection (1)) of the Taxes Consolidation Act 1997 ). |