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6 1967

INCOME TAX ACT, 1967

Chapter II

Treatment of Capital Allowances

Interpretation.

317. —(1) In this Chapter—

balancing charges” means balancing charges under Part XVI;

capital allowances” means allowances, other than allowances falling to be made in computing profits or gains, under section 241 or Part XIV, XV, XVI or XVII;

year of claim” means, in relation to any claim under section 307, the year of assessment for which the claim is made.

(2) For the purposes of this Chapter—

(a) where the end of the basis period for a year of assessment falls in or coincides with the end of any year of assessment, that year is the basis year for the first-mentioned year of assessment, but so that if a year of assessment would under the foregoing provision be the basis year both for that year itself and another year of assessment, it shall be the basis year for the year itself and not for the other year;

(b) any reference to capital allowances or balancing charges for a year of assessment shall be construed as a reference to those falling to be made in charging the profits or gains of the trade for that year, excluding, in the case of allowances, amounts carried forward from an earlier year;

(c) effect shall be deemed to be given in charging the profits or gains of the trade for a year of assessment to allowances carried forward from an earlier year before it is given to allowances for the year of assessment; and

(d) any reference to an amount of capital allowances non-effective in a year of assessment shall be construed as referring to the amount to which by reason of an insufficiency of profits or gains effect cannot be given in charging the profits or gains of the trade for that year.

In paragraph (a) “the basis period for a year of assessment” means in relation to any trade the period on the profits or gains of which income tax for that year falls to be finally computed under Case I of Schedule D in respect of the trade or, where, by virtue of this Act, the profits or gains of any other period are to be taken to be the profits or gains of the said period, that other period.

Option to treat as creating or augmenting loss.

318. —(1) Subject to the provisions of this Chapter, any claim made under section 307, for relief in respect of a loss sustained in any trade, may require the amount of the loss to be determined as if an amount equal to the capital allowances for the year of assessment for which the year of claim is the basis year were to be deducted in computing the profits or gains or losses of the trade in the year of claim and a claim may be so made notwithstanding that apart from those allowances a loss has not been sustained in the trade in the year of claim.

(2) Where on any claim made by virtue of this Chapter relief is not given under section 307 for the full amount of the loss determined as aforesaid, the relief shall be referred as far as may be to the loss sustained in the trade rather than to the capital allowances in respect of the trade.

Extent to which allowances to be taken into account.

319. —(1) The capital allowances for any year of assessment shall be taken into account under section 318 (1) only if and so far as they are not required to offset balancing charges for the year; and, where the capital allowances taken into account are allowances for the year of claim, relief shall not be given by reference to those allowances in respect of an amount greater than the amount non-effective in the year of claim.

(2) For the purposes of subsection (1), the capital allowances for any year of assessment shall be treated as required to offset balancing charges for the year up to the amount on which the balancing charges fall to be made after deducting from that amount the amount, if any, of capital allowances for earlier years which is carried forward to that year and would, without the balancing charges, be non-effective in that year.

Effect of giving relief.

320. —Where for any year of claim relief is given under section 307 by reference to any capital allowances, then, for all the purposes of this Act, effect shall be deemed to have been given to those allowances up to the amount in respect of which relief is so given, and any relief previously given for a subsequent year on the basis that effect had not been given to the allowances as aforesaid shall be adjusted, where necessary, by additional assessment.

Grant of relief before passing of annual Act.

321. —Relief from tax may be given by virtue of section 318 (1) by reference to capital allowances for a year of assessment before the passing of any Act imposing income tax for that year, as if income tax had been imposed for the year without alteration; but if relief given to a person by virtue of section 318 (1) for any year of claim is affected by a subsequent alteration of the law, or by any discontinuance of the trade or other event occurring after the end of the year, any necessary adjustment may be made, and so much of any repayment of tax as exceeded the amount repayable in the events that happened shall, if not otherwise made good, be recovered from the person by assessment under Case IV of Schedule D; and for the purpose of such assessment the amount of capital allowances by reference to which the repayment was made, or an appropriate part of that amount, shall be deemed to be income chargeable under the said Case IV for the year of claim.

Application to professions, etc.

322. —This Chapter applies, with any necessary adaptations, in relation to a profession or employment and in relation to the occupation of lands for the purposes of husbandry only or of woodlands, where, in either case, profits or gains arising from the occupation are, for the year of claim and the year of assessment for which the year of claim is the basis year, chargeable under Schedule D, as it applies in relation to a trade.