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Capital Allowances |
43 |
There was a temporary reintroduction of initial allowances for capital expenditure on any industrial buildings for a period of 1 year beginning 1 November 1992. CAA 1990, section 1, the general provision for initial allowances, was modified by a new CAA 1990, section 2A.403 The rate of allowance was 20%. |
24A.3.5 The Writing down Allowance |
Writing down allowances are available to the person entitled to the relevant interest in the building, provided the building was used as ‘an industrial building’ at the end of the chargeable period.404 Unless the building is in an enterprise zone, the allowance is 4% of the cost for a full year but this is to be reduced or increased if the chargeable period is less or more than 12 months.405 If the building is in an enterprise zone the rate is 25%.406 Allowances are available during periods of temporary disuse.407 In a straightforward case the expense will have been written off after 25 years. |
24A.3.6 Balancing Adjustments: Allowances and Charges |
A balancing adjustment, whether by allowance or charge arises if, within 25 years of the building being first used, the relevant interest is sold, or the building is demolished, destroyed or ceases to be used altogether.408 No adjustment is made if the balancing event occurs more than 25 years after the building is first used.409 No adjustment is made merely because the building ceases to be used for the purpose of a qualifying trade, although an adjustment will be made on a subsequent sale or demolition, etc.410 In the meantime the writing down allowance ceases unless the cessation of use is purely temporary.411 |
| A balance is also struck if, within 25 years of the building being first used, the relevant interest ends and is not deemed to continue412 —as where the interest merges in the reversionary interest—or where the relevant interest depends upon a foreign concession which ends. |
24A.3.6.1 The Residue of Qualifying Expenditure |
| The amount and nature of the adjustment depend on the ‘residue of qualifying expenditure’ which is the qualifying expenditure not yet written off413 or, more fully, what CAA 2001 calls the starting expenditure (ie the original cost) minus the allowances made (whether initial or writing down). This residue is set against the proceeds from the balancing event, ie any sale, insurance compensation or salvage monies.414 Where the residue is greater than those sums, the difference is the subject of the balancing allowance; where it is less, the difference is the subject of the balancing charge, subject to the rule that the charge may not exceed the |