You may have a case where plant or machinery is leased to two or more people jointly. The normal rules do not work because they look at the use by the lessee. If there are several lessees some may be non-qualifying lessees while others are not. There are rules (the joint lessees legislation) that apply where plant or machinery is leased to two or more people jointly and both the following conditions are satisfied:
When the joint lessees use the plant or machinery for the
purposes of a qualifying activity or qualifying activities
otherwise than for leasing the overseas leasing legislation does
not apply to all or part of the expenditure on the plant or
machinery. It does not apply to the extent that it appears that the
profits or gains of the qualifying activity arising throughout the
designated period (or during the period of the lease, if shorter)
will be chargeable to tax. The part of the expenditure that is
excluded from the overseas leasing legislation will qualify for a
normal WDA. If you have a case like that you split the expenditure
and treat it as being expenditure on two separate items of plant or
machinery, one subject to the overseas leasing rules and one not.
Example Jim buys a computer for £8,000. Jim
leases the computer jointly to Ray and Robbie, who use the computer
for a qualifying activity other than leasing.
Robbie is not resident in the UK and does not use the
computer exclusively for earning profits chargeable to UK tax. It
appears that, throughout the designated period, 25% of the profits
of Ray and Robbie's qualifying activity will be chargeable to tax.
Because 25% of Ray and Robbie's profits will be chargeable to
tax, the overseas leasing legislation does not apply to 25% of the
expenditure incurred on the computer, £2,000. The overseas
leasing legislation applies to the other £6,000.
Where plant or machinery is leased to joint lessees, and:
the separate item of plant or machinery that has qualified for a
normal WDA is treated as if it had begun to be used for overseas
leasing that is not protected leasing CA24100. This means that
there is a recovery of excess allowances
CA24210.
Example As in the example above, Jim owns a
computer that he leases jointly to Ray and Robbie for use in a
qualifying activity other than leasing. Robbie is not resident in
the UK and does not use the computer exclusively for earning
profits chargeable to UK tax. It appears that, throughout the
designated period, 25% of the profits of Ray and Robbie's
qualifying activity will be chargeable to tax. This means that 25%
of the expenditure incurred on the computer qualifies for a normal
WDA.
If at some later time in the designated period, neither Ray
nor Robbie uses the computer for a qualifying activity whose
profits are chargeable to tax in the UK, this is what happens:
These are the rules that apply where:
Where the above conditions are satisfied you should treat the
whole of the plant or machinery (not just a part of it) as if it
had begun to be used for overseas leasing that is not protected
leasing. This means that there is a recovery of excess allowances
CA24210.
There are also rules that apply where:
The amount of expenditure which qualifies for a normal writing
down allowance will have been based on the extent to which the
plant or machinery was expected to be used for the purposes of a
qualifying activity within the charge to tax and so it will have
been too high. At the end of the designated period there is a
recovery of excess relief on that part of the expenditure that has
qualified for a normal writing down allowance. The excess relief
corresponds to the over-estimate of the extent to which the plant
or machinery would be used for the purposes of a qualifying
activity chargeable to tax.
If disposal proceeds are brought to account, they are
apportioned by reference to the extent of actual use for the
purposes of a qualifying activity or qualifying activities
chargeable to tax in the UK.
Example As in the example above, Jim leases a
computer jointly to Ray and Robbie. Ray and Robbie use the computer
for a qualifying activity other than leasing. Robbie is not
resident in the UK and does not use the computer exclusively for
earning profits chargeable to UK tax, so that the joint lessees
legislation applies. It appears that, throughout the designated
period, 25% of the profits of Ray and Robbie's qualifying activity
will be chargeable to tax. This means that 25% of the expenditure
incurred on the computer will qualify for writing down allowances
at the 25% rate.
At the end of the designated period, the computer has in fact
been used 20% for the purposes of a qualifying activity whose
profits are chargeable to tax. So 5% (25% - 20%) of the expenditure
that has qualified for a normal writing down allowance should not
have done so meaning that:
