Taxes Consolidation Act 1997 section 769B

Annual allowance for capital expenditure on purchase of capacity rights

Section 769B provides for writing-down allowances in respect of qualifying expenditure incurred by a company on the purchase of transmission capacity rights.

• A company that incurs qualifying expenditure on or after 1 April 2000 on the purchase of capacity rights may claim writing-down allowances against the profits of its trade or, where relevant, against income receivable from the rights.
• The writing-down period is seven years, or the number of years for which the rights are purchased if that exceeds seven years, beginning with the accounting period in which the expenditure is incurred; allowances are calculated using the formula A × (B/C).
• Pre-trading expenditure on capacity rights is treated as incurred on the first day of trading, unless the company has sold all the purchased capacity rights before that day.
• An anti-avoidance rule denies the allowance where a company purchases capacity rights from another company in the same group, unless the selling company was itself entitled to an allowance in respect of those rights.