CA25650 - PMA: Ships: Changes in persons carrying on qualifying activity, connected persons
CAA01/S156 - S158
Sometimes you should ignore changes in the persons carrying on the trade in deciding whether a person incurred expenditure. Treat expenditure as incurred by a person if:
- it is incurred by the persons who are carrying on the trade at
the time, and
- any changes in the persons carrying on the trade between the time that it was carried on by that person and the time when the expenditure was incurred were treated as continuations under ICTA88/S343 (2).
Example David, Stephen and Graham are in
partnership and run a shipping business. Neil joins the
partnership. The trade is treated as continuing. David, Stephen and
Graham owned a wooden ship that they sold and claimed deferment of
the balancing charge that arose. For the purposes of the deferment
rules you should treat expenditure incurred by David, Stephen,
Graham and Neil as if David, Stephen and Graham incurred it. This
means that David, Stephen and Graham can attribute their deferred
balancing charge to expenditure on new shipping incurred by David,
Stephen, Graham and Neil.
The normal definition of connected persons in S575 CA23770
applies for the purposes of the deferment legislation.
A person is also connected with another for the purposes of
the deferment legislation if:
- that person is carrying on the qualifying activity previously carried on by the other person, and
- any changes in the persons carrying on the trade between the time that it was carried on by that person and the time when the expenditure was incurred were treated as continuations under ICTA88/S343 (2).
There is a third way in which people can be connected for the purposes of the deferment legislation. A person is connected with another person if:
- the person is connected with the person carrying on the qualifying activity previously carried on by the other person, and
- any changes in the persons carrying on the trade between the time that it was carried on by that person and the time when the expenditure was incurred were treated as continuations under ICTA88/S343 (2).
Example One of Oriental Ltd.'s activities is
shipping. It sets up a subsidiary company Havana Ltd. It hives down
its shipping business to Havana Ltd. and ICTA88/S343 (2) treats the
shipping business as continuing. Oriental Ltd. then sells the
shares in Havana Ltd. to Siamese Ltd. Havana Ltd., then becomes a
subsidiary of Siamese Ltd. Burman Ltd. is also a subsidiary company
of Siamese Ltd. and so Havana Ltd. and Burman Ltd. are connected.
Burman Ltd. is connected with Oriental Ltd. for the purposes of the
deferment legislation because it is connected with Havana Ltd. and
Havana Ltd. is carrying on the qualifying activity previously
carried on by Oriental Ltd. This means that if Burman Ltd. buys a
ship that was owned by Oriental Ltd. two years ago the expenditure
is not expenditure on new shipping. The ship has belonged to
Oriental Ltd., a person connected Burman Ltd., in the six years
ending with Burman Ltd.'s acquisition of the ship
CA25600.
CAA01/S157 lets you make any assessments or adjustments of
assessments needed as a result of a claim for the deferment of a
balancing charge.
You should use the definitions in ICTA88 Chapter IV Part X
(group relief) to decide whether two companies are members of the
same group.
Membership of a group is not fixed for all time. If a company
stops being a member of the same group as the shipowner, it stops
being a person against whose expenditure on new shipping a deferred
balancing charge may be attributed. This means that if the ship
owner has rolled over a balancing charge against that company's
expenditure on new shipping the balancing charge should be
reinstated.
For example, a company that goes into liquidation stops being
a member of a group. If a balancing charge has been rolled over
against expenditure on new shipping incurred by another member of
the group and that company goes into liquidation the addition to
the shipowner's qualifying expenditure should be withdrawn.
