Paragraph 34-35 - General
34. Where a person incurs capital expenditure on the provision of a glasshouse used for the purposes of his trade and, as a result, the glasshouse belongs, or has belonged, to him, he is treated as having incurred expenditure on the provision of machinery or plant.
35. In consequence, capital allowances are available to him in respect of a glasshouse used for the purposes of the trade but the rules are modified by the following 2 paragraphs, with the result that expenditure on glasshouses cannot be pooled in the same way as expenditure on machinery or plant.
Paragraph 36 - Rate of Allowance (Glasshouse)
36. Whereas the rate of allowance for machinery or plant is 25%, the rate of allowance for a glasshouse is 10%.
Paragraph 37-39 - Disposal
37. Where any glasshouse ceases to belong to a trader and commences to belong to some other person, the glasshouse is treated as having been sold for a sum equal to the residual value of the glasshouse in the capital allowances computation of the previous owner at the time he ceased to own it.
38. The purpose of this provision is to avoid a situation where a balancing charge extinguishes relief previously granted by way of capital allowances. The new owner may nevertheless claim capital allowances by reference to the cost to him of the glasshouse.
39. It is important to bear in mind that it is the cost of the glasshouse only, ie the structure, that represents qualifying expenditure. The cost of the land must be left out of account.
Paragraph 40-42 - Basis Period
40. For the purpose of computing allowances and charges, the "basis period" is the period on which the profits for the year of assessment are finally computed. If, therefore, the primary period of computation is replaced by another, the latter is the basis period.
41. Where 2 basis periods overlap, the common period is deemed to fall in the first basis period only. The practical effect of this rule is demonstrated in Example 1. The first 6 months of trading fall into the basis periods of all three years of assessment 1990, 1991 and 1992. In consequence, the capital expenditure of the initial six months first generates allowances for 1990 but it is excluded from being brought into the computation a second and third time.
42. Where there is an interval between the basis periods for two successive years of assessment:
- a. if the second of the years is not the year of permanent discontinuance, the interval is deemed to be part of the second period
- b. if the second year is the year of permanent discontinuance, the interval is deemed to be part of the first period
Paragraph 43-44 - Plant etc. introduced into the business
43. Where a person incurs capital expenditure on the provision of machinery or plant otherwise than for the purposes of his trade and later brings that machinery or plant into use for the purposes of that trade, he is treated as having incurred capital expenditure equal to the open market value of the machinery or plant on the date when he so brings it into use.
44. Where machinery or plant is given to a person by a trader who, in consequence of the gift, was required to bring into his capital allowances computation a disposal value equal to market value at the time of the gift (see paragraph 28), the recipient of the gift is entitled to capital allowance as if he had paid open market value for the machinery or plant at the time he brings it into use for the purpose of his trade.
Paragraph 45 - Activities other than trades
45. The capital allowances rules are extended by statute to professions, vocations, employments or offices and by concession to those sources in respect of which wear and tear allowances were concessionally granted, in particular letting; and investment holding by a company entitled to management expenses.
Paragraph 46 - Successions
46. Where all his machinery or plant is transferred by a trader to the successor to his trade, the capital allowances will, by concession, be calculated as if the trade continued, provided that both parties agree.
Paragraph 47 - Replacement Allowance
47. As mentioned in paragraph 1, capital expenditure is not deductible in arriving at chargeable profits. However, by long-established concession, relief is granted for the cost of the replacement of machinery or plant, provided that no deduction of any kind was claimed for the original item now being replaced. This practical treatment remains available as an alternative to capital allowances but a switch from the statutory to the non-statutory basis is, as before, prohibited.
Paragraph 48 - Letting Furnished Property
48. A sum equal to 10% of the income arising from letting furnished property may be deducted in arriving at the balance of profits assessable to income tax. This deduction is in lieu of annual claims to wear and tear, capital or replacement allowances.
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