Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 4

Transmission Capacity Rights

Overview

This Chapter provides capital allowances for expenditure incurred by companies on the purchase of long-term rights to use advanced communications infrastructure. Capital allowances are already available in respect of investments in the physical infrastructure such as cabling and equipment. The purpose of the Chapter is to extend allowances to expenditure incurred on long-term rights to use assets owned by others to facilitate the growth in electronic commerce.

The allowances apply to long-term rights to use wired, radio or optical transmission paths for the transfer of data and information. These rights, known as indefeasible rights of use, or IRU’s, typically span periods of 10 to 25 years and are generally purchased by means of a lump-sum payment made in advance. The chapter provides that expenditure incurred by a company on such rights can be written off over the life of the agreement relating to the use of the rights, subject to a minimum write off period of 7 years. The measure applies to expenditure incurred on or after the 1st of April, 2000. However, the allowance does not apply to expenditure incurred on or after 6 February 2003 on the acquisition of a licence issued on or after that date by the Commission for Communications Regulation under —

  1. the Wireless Telegraphy Acts 1926 to 1988, or
  2. the Postal and Telecommunications Services Act 1983.

A series of anti-avoidance measures are also provided so as to ensure that entitlement to the allowances cannot be artificially created by a sale of capacity rights within a group of companies. Without these provisions a licence could be purchased from the Commission for Communications Regulation and sold on to a group company, thus creating an entitlement by that second company to the allowances.

The general provisions relating to the granting of capital allowances contained in Chapter 4 of Part 9 are applied, and adapted, as necessary for the purposes of the allowances provided by this Chapter, by virtue of section 769E.

769A Interpretation (Chapter 4)

(1) This section gives the meaning of certain terms and provides rules for the construction of certain references used in this Chapter. The following terms are defined:

“capacity rights” means the right to use wired, radio or optical means for the transfer of voice, data or information.

“control” has the same meaning as in section 432.

“qualifying expenditure” means capital expenditure incurred on capacity rights excluding expenditure incurred on or after 6 February 2003 on licences issued on or after that date by the Commission for Communications Regulation under —

  1. the Wireless Telegraphy Acts 1926 to 1988, or
  2. the Postal and Telecommunications Act 1983.

“writing-down period” is as defined in section 769B(2).

Grant or acquisition of licence to use capacity rights

(2) The grant or acquisition of a licence to use capacity rights is to be regarded as a sale or purchase of a part of the rights. However, where the terms of a licence are such that the licensee is to have the sole use of the capacity rights to the exclusion of the grantor and all other persons for the remaining life of the rights, the grant of the licence is to be treated as equivalent to the sale by the grantor of the whole of the capacity rights.

Relevant Date: Finance Act 2021