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39 1997

TAXES CONSOLIDATION ACT, 1997

PART 11

Capital Allowances and Expenses for Certain Road Vehicles

Interpretation ( Part 11 ).

[FA73 s30(1), (5) and (6); FA76 s31, FA86 s50(1); FA88 s24(1); FA89 s12(1); FA92 s21(1); FA94 s21(1); FA95 s23(1); FA97 s21(1)]

373. —(1) Subject to section 380 (1), this Part shall apply to a vehicle which is a mechanically propelled road vehicle constructed or adapted for the carriage of passengers, other than a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.

(2) In this Part, “the specified amount”, in relation to expenditure incurred on the provision or hiring of a vehicle to which this Part applies, means—

(a) £2,500, where the expenditure was incurred on or after the 16th day of May, 1973, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred under a contract entered into before that day where either—

(I) the expenditure was incurred within 12 months after that day, or

(II) the contract was one of hire-purchase or for purchase by instalments,

and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure where the contract of hire-purchase or for purchase by instalments was entered into before that day;

(b) £3,500, where the expenditure was incurred after the 28th day of January, 1976, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure under a contract entered into on or before that day;

(c) £4,000, where the expenditure was incurred on or after the 6th day of April, 1986, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure under a contract entered into before that day;

(d) £6,000, where the expenditure was incurred on or after the 28th day of January, 1988, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure under a contract entered into before that day;

(e) £7,000, where the expenditure was incurred on or after the 26th day of January, 1989, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure under a contract entered into before that day;

(f) £10,000, where the expenditure was incurred on or after the 30th day of January, 1992, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure under a contract entered into before that day;

(g) £13,000, where the expenditure was incurred on or after the 27th day of January, 1994, on the provision or hiring of a vehicle which on or after that day was first registered in the State under section 131 of the Finance Act, 1992 , without having been previously registered in any other State which provides for the registration of a mechanically propelled vehicle, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure incurred under a contract entered into before that day;

(h) £14,000, where the expenditure was incurred on or after the 9th day of February, 1995, on the provision or hiring of a vehicle which on or after that day was not a used or secondhand vehicle and was first registered in the State under section 131 of the Finance Act, 1992 , without having been previously registered in any other State which provides for the registration of a mechanically propelled vehicle, but such expenditure does not include—

(i) as respects sections 374 , 375 and 377 , expenditure incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of section 378 and section 379 , expenditure incurred under a contract entered into before that day;

(i) £15,000, where the expenditure was incurred on or after the 23rd day of January, 1997, on the provision or hiring of a vehicle which, on or after that date was not a used or secondhand vehicle and was first registered in the State under section 131 of the Finance Act, 1992 , without having been previously registered in any other State which duly provides for the registration of a mechanically propelled vehicle.

(3) This Part (other than section 376 ) shall be construed as one with Part 9 , except that in section 375 capital expenditure” shall be construed without regard to section 316 (1).

Capital allowances for cars costing over certain amount.

[FA73 s25; CTA76 s21(1) and Sch1 par62; FA97 s146(1) and Sch9 PtI par6(1)]

374. —(1) In relation to a vehicle to which this Part applies, section 284 shall apply as if, for the purpose of subsection (3) of that section, the actual cost of the vehicle were taken to be the specified amount where the expenditure incurred on the provision of the vehicle exceeded that amount and, where an allowance which apart from this subsection would be made under section 284 is to be reduced by virtue of this subsection, any reference in the Tax Acts to an allowance made under section 284 shall be construed as a reference to that allowance as reduced under this subsection.

(2) In relation to a vehicle to which this Part applies, the allowances under section 284 to be taken into account for the purposes of Chapter 2 of Part 9 in computing the amount of expenditure still unallowed at any time shall be limited to those computed in accordance with subsection (1), and the expenditure incurred on the provision of the vehicle to be taken into account for the purposes of that Chapter shall be limited to the specified amount.

(3) Where the expenditure incurred on the provision of a vehicle to which this Part applies exceeds the specified amount, any balancing allowance or balancing charge shall be computed, in a case where there are sale, insurance, salvage or compensation moneys, as if the amount of those moneys (or, where in consequence of any provision of the Tax Acts other than this subsection some other amount is to be treated as the amount of those moneys, that other amount) were reduced in the proportion which the specified amount bears to the actual amount of that expenditure.

(4) (a) Where the expenditure incurred on the provision of a vehicle to which this Part applies exceeds the specified amount and—

(i) the person providing the vehicle (in this section referred to as “the prior owner”) sells the vehicle or gives it away so that subsection (5) of section 289 , or that subsection as applied by subsection (6) of that section, applies in relation to the purchaser or donee,

(ii) the prior owner sells the vehicle and the sale is a sale to which section 312 applies, or

(iii) in consequence of a succession to the trade or profession of the prior owner, section 313 (1) applies, then, in relation to the purchaser, donee or successor, the price which the vehicle would have fetched if sold in the open market or the expenditure incurred by the prior owner on the provision of the vehicle shall be treated for the purposes of section 289 , 312 or 313 as reduced in the proportion which the specified amount bears to the actual amount of that expenditure, and, in the application of subsection (3) to the purchaser, donee or successor, references to the expenditure incurred on the provision of the vehicle shall be construed as references to the expenditure so incurred by the prior owner.

(b) Where paragraph (a) has applied on any occasion in relation to a vehicle, and no sale or gift of the vehicle has since occurred other than one to which either section 289 or 312 applies, then, in relation to all persons concerned, the like consequences under paragraph (a) shall ensue as respects a gift, sale or succession within subparagraphs (i) to (iii) of that paragraph which occurs on any subsequent occasion as would ensue if the person who in relation to that sale, gift or succession is the prior owner had incurred expenditure on the provision of the vehicle of an amount equal to the expenditure so incurred by the person who was the prior owner on the first-mentioned occasion.

(5) In the application of section 290 to a case where the vehicle is the new machinery or plant referred to in that subsection, the expenditure shall be disregarded in so far as it exceeds the specified amount, but without prejudice to the application of subsections (1) to (4) to the vehicle.

(6) Where the capital expenditure incurred on the provision of a vehicle exceeds the specified amount but under section 317 (2) any part of that expenditure is to be treated as not having been incurred by a person, the amount which (subject to subsections (1) to (5)) is to be treated for the purposes of Part 9 as having been incurred by that person shall be reduced in the proportion which the specified amount bears to the capital expenditure incurred on the provision of the vehicle.

Limit on renewals allowance for cars.

[FA73 s26; CTA76 s140(1) and Sch2 PtI par33 and s164 and Sch3 PtI]

375. —In determining what amount (if any) is allowable—

(a) to be deducted in computing profits or gains chargeable to tax under Schedule D,

(b) to be deducted from emoluments chargeable to tax under Schedule E, or

(c) to be taken into account for the purposes of a management expenses claim under section 83 or under that section as applied by section 707 ,

in respect of capital expenditure incurred on the provision of a vehicle to which this Part applies, being expenditure exceeding the specified amount, the excess over the specified amount shall be disregarded; but, if on the replacement of the vehicle any amount becomes so allowable in respect of capital expenditure on any other vehicle, any deduction to be made, in determining the last-mentioned amount, for the value or proceeds of sale of the replaced vehicle or otherwise in respect of the replaced vehicle shall be reduced in theproportion which the specified amount bears to the cost of the replaced vehicle.

Restriction of deduction in respect of running expenses of cars.

[FA76 s32; FA95 s23(2); FA97 s21(2)]

376. —(1) In this section—

qualifying expenditure” means the amount of expenditure incurred in relation to a vehicle to which this Part applies, being expenditure which but for this section—

(a) would be allowable as a deduction—

(i) in the computation of the profits or gains chargeable to tax under Schedule D of the trade, profession or business in the course of which the vehicle is used, or

(ii) in the computation of the profits or gains chargeable to tax under Schedule E from an office or employment in the performance of the duties of which the vehicle is used,

or

(b) would be taken into account for the purposes of a claim in respect of expenses of management under section 83 or under that section as applied by section 707 ;

relevant amount” means—

(a) in relation to qualifying expenditure incurred before the 23rd day of January, 1997, £14,000, and

(b) in relation to qualifying expenditure incurred on or after the 23rd day of January, 1997, £15,000;

relevant cost”, in relation to a vehicle provided for the purposes of a trade, profession, business, office or employment, means—

(a) in a case where the vehicle is purchased by the person providing it, the actual cost to that person of providing the vehicle, or

(b) in a case where the vehicle is not purchased by the person providing it, the retail price of the vehicle at the time it was first provided for use by that person.

(2) (a) Where for any year of assessment or accounting period a deduction is claimed by any person in respect of qualifying expenditure and that expenditure is incurred in respect of a vehicle the relevant cost of which exceeds the relevant amount, the amount of the deduction to be allowed in respect of that qualifying expenditure shall be reduced—

(i) subject to paragraph (b), by one-third of the amount by which the relevant cost of the vehicle exceeds the relevant amount, or

(ii) where that person so elects, by an amount which bears to the amount of the qualifying expenditure the same proportion as the excess of the relevant cost of the vehicle over the relevant amount bears to the relevant cost of the vehicle.

(b) Where paragraph (a)(i) applies and the period in respect of which the qualifying expenditure is incurred is part only of a year, the amount by which the deduction is to be reduced for that period by virtue of paragraph (a)(i) shall be reduced in the proportion which that part of the year bears to a year.

Limit on deductions, etc. for hiring cars.

[FA73 s27]

377. —Where apart from this section the amount of any expenditure on the hiring (otherwise than by means of hire-purchase) of a vehicle to which this Part applies would be allowed to be deducted or taken into account as mentioned in section 375 , and the retail price of the vehicle at the time it was made exceeded the specified amount, the amount of that expenditure shall be reduced in the proportion which the specified amount bears to that price.

Cars: provisions as to hire-purchase, etc.

[FA73 s28]

378. —(1) In the case of a vehicle to which this Part applies, being a vehicle the retail price of which at the time of the contract in question exceeds the specified amount, subsections (2) to (4) shall apply.

(2) Where a person, having incurred capital expenditure on the provision of a vehicle to which this Part applies under a contract providing that such person shall or may become the owner of the vehicle on the performance of the contract, ceases to be entitled to the benefit of the contract without becoming the owner of the vehicle, that expenditure shall, in so far as it relates to the vehicle, be disregarded for the purposes of Chapter 2 of Part 9 and in determining what amount (if any) is allowable as mentioned in section 375 .

(3) Where subsection (2) applies, all payments made under the contract shall be treated for tax purposes (including in particular for the purposes of section 377 ) as expenditure incurred on the hiring of the vehicle otherwise than by means of hire-purchase.

(4) Where the person providing the vehicle takes it under a hire-purchase contract, then, in apportioning the payments under the contract between capital expenditure incurred on the provision of the vehicle and other expenditure, so much of those payments shall be treated as such capital expenditure as is equal to the price which would be chargeable, at the time the contract is entered into, to the person providing the vehicle if that person were acquiring it on a sale outright.

Cars: provisions where hirer becomes owner.

[FA73 s29]

379. —Where, having hired (otherwise than by means of hire-purchase) a vehicle to which this Part applies, a person subsequently becomes the owner of the vehicle and the retail price of the vehicle at the time it was made exceeded the specified amount, then, for the purposes of the Tax Acts (and in particular sections 374 and 377 )—

(a) so much of the aggregate of the payments for the hire of the vehicle and of any payment for the acquisition of the vehicle as does not exceed the retail price of the vehicle at the time it was made shall be treated as capital expenditure incurred on the provision of the vehicle, and as having been incurred when the hiring began, and

(b) the payments to be treated as expenditure on the hiring of the vehicle shall be rateably reduced so as to amount in the aggregate to the balance.

Provisions supplementary to sections 374 to 379 .

[FA73 s30(2) to (4); CTA76 s164 and Sch3 PtII]

380. —(1) Sections 374 , 375 and 377 , subsections (2) and (3) of section 378 and section 379 shall not apply where a vehicle is provided or hired, wholly or mainly, for the purpose of hire to or the carriage of members of the public in the ordinary course of trade.

(2) Sections 374 and 375 , subsections (2) and (3) of section 378 and section 379 shall not apply in relation to a vehicle provided by a person who is a manufacturer of a vehicle to which this Part applies, or of parts or accessories for such a vehicle, if the person shows that the vehicle was provided solely for the purpose of testing the vehicle or parts or accessories for such vehicle; but, if during the period of 5 years beginning with the time when the vehicle was provided, such person puts it to any substantial extent to a use which does not serve that purpose only, this subsection shall be deemed not to have applied in relation to the vehicle.

(3) (a) There shall be made all such additional assessments and adjustments of assessments as may be necessary for the purpose of applying subsections (2) and (3) of section 378 , section 379 and subsection (2), and any such additional assessments or adjustments of assessments may be made at any time.

(b) In the case of the death of a person who, if he or she had not died, would under subsections (2) and (3) of section 378 , section 379 and subsection (2) have become chargeable to tax for any year, the tax which would have been so chargeable shall be assessed and charged on his or her executors or administrators and shall be a debt due from and payable out of his or her estate.