Introduction Details of the Section
2.Subsection (3) inserts new subsection (1A) into section 70J of CAA. The new subsection provides that a lease of “cushion gas” is also a “funding lease” whether or not it would otherwise be so regarded. Previously, a lease of plant or machinery was only a “funding lease” if it met the tests in section 70J(1).
3.Subsection (5) inserts new subsection 7 into section 70J. The new subsection explains what is meant by “cushion gas” and defines it as gas that functions or is intended to function as plant in a particular gas storage facility. The meaning also applies for the amended section 104A of CAA (see paragraph 4 below) and new section 104G.
4.Subsection (6) amends section 104A of CAA by adding a new paragraph in subsection (1). The new paragraph provides that expenditure incurred on or after 1 April 2010 on the provision of cushion gas is to be treated as special rate expenditure.
5.Subsection (7) inserts new section 104G after section 104F of CAA.
6.New section 104G gives the rules in relation to disposal events in respect of cushion gas that consists of both “new” and “old” expenditure. “New” and “old” expenditure are later defined in new section 104G(5).
7.New section 104G(1) explains that the section applies only if a person has incurred expenditure on the provision of cushion gas in a particular gas storage facility both before 1 April 2010 (old expenditure) and on or after 1 April 2010 (new expenditure).
8.New section 104G(2) provides that any disposal event in relation to the cushion gas is to be treated as a disposal event in relation to the “new expenditure” before it is treated as relating to the “old expenditure”. The rule effectively ensures that if the “old expenditure” was in the main pool, then that expenditure is retained, and will continue to attract allowances at 20 per cent, in preference to later expenditure which has been allocated to the special rate pool.
9.New section 104G(3) sets out the consequences of the rule in new section 104G(2).
10.New section 104G(4) provides and clarifies that disposals of cushion gas that qualified for relief under the pre 1 April 2010 rules are treated as separate from disposals of cushion gas that qualified for relief under the post 1 April 2010 rules, even if there is, in fact, only one event, such as a single contract for sale.
11.Subsection (8) gives the commencement provision in respect of subsections (2) to (5). Any lease whose inception is on or after 1 April 2010 will be a funding lease. There is a definition of “inception” in section 70YI(1) of CAA.
12.Subsections (9) and (10) give the commencement provisions in respect of subsections (6) and (7) respectively, and provide that the amendments made relate to expenditure incurred or disposal events taking place on or after 1 April 2010.