Finance Act, 1959

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Option in case of replacement of machinery or plant.

35.—(1) Where machinery or plant in the case of which any of the events mentioned in subsection (1) of section 34 of this Act has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event, or, but for the provisions of this subsection, would have fallen to be made on him by reason thereof, then, if by notice in writing to the inspector of taxes he so elects, the following provisions shall have effect:

(a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant—

(i) the charge shall be made only on an amount equal to the difference,

(ii) no initial allowance, no balancing allowance and no wear and tear allowance shall be made in respect of the new machinery or plant or the expenditure on the provision thereof, and

(iii) in considering whether any, and if so what, balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure;

(b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made—

(i) the charge shall not be made,

(ii) the amount of any initial allowance in respect of the said expenditure and the amount of any wear and tear allowance shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made, and

(iii) in considering whether any, and if so what, balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, there shall be deemed to have been granted in respect thereof an initial allowance equal to the amount on which the charge would have been made, in addition to any initial allowance actually granted in respect thereof.

(2) In relation to the estimation of the profits or gains of a trade, Rule 7 of the Rules applicable to Cases I and II of Schedule D—

(a) shall not have effect in the case of plant or machinery provided on or after the 15th day of April, 1959, and

(b) shall, in the case of the replacement on or after the 15th day of April, 1959, of machinery or plant provided before that date, have effect only if the person carrying on the trade by notice in writing to the inspector of taxes elects that it shall have effect in relation thereto,

and where any such election is made as is mentioned in paragraph (b) of this subsection, no balancing allowance shall be made in respect of the machinery or plant which is replaced.

(3) Where, in consequence of an election under subsection (2) of this section, Rule 7 of the Rules applicable to Cases I and II of Schedule D has effect in the case of the replacement of any machinery or plant, the provisions of sections 41 and 42 of this Act shall apply for the purpose of determining the amount which is to be allowed to be deducted as expenses in estimating the profits or gains of the trade as they apply for the purpose of determining the amount of a balancing allowance.