OT21240 - Corporation Tax Ring Fence and Supplementary Charge

First-year Allowances for a Ring Fence Trade: Plant and Machinery: Withdrawal of Allowances if there is Non-Ring Fence Use: CAA01/s45G

CAAA01/s45G(1) provides that the special ring fence first-year allowances can be withdrawn if the plant or machinery concerned is either

• at no time in the relevant period (defined below) used in a ring fence trade, or
• at any time in the relevant period used for a purpose other than that of a ring fence trade.

The relevant period is defined in CAA01/s45G(2) to be

• five years from the date the expenditure in question was incurred or, if less,
• the period ending when the asset is sold outside the group.

Ending the relevant period before the five year point when an asset is sold outside the group removes the problems which would otherwise be faced in tracking assets through changes of ownership and the need to cover the possibility of first-year allowance adjustments in asset sale agreements.

As with CAA01/s45F ( OT21235), CAA01/s45G should be read so that references to asset include references to so much of the company's original share in an asset as at any time remains within the group.

CAA01/s45G(3) provides for assessments to be made or adjusted to give effect to S45G, and CAA01/s45G(4) and (5) requires a company to notify the Revenue within three months of any event triggering the operation of CAA01/s45G.

FA02/Sch21/Para 7 ensures the normal penalty provisions apply if a company fails to inform the Revenue that its return is incorrect and first-year allowances are no longer due because the plant or machinery has not been used in a ring fence trade for the relevant period specified in CAA01/s45G.

If an Inspector has reason to believe that any such sale before the five year point has been entered into wholly or mainly to avoid the withdrawal of a first-year allowance, the case should be referred to an Assistant Director.