Legalize / United Kingdom / Public General Act

Capital Allowances Act 2001

Type Public General Act

Publication 2001-03-22

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(1) No initial allowance is to be made under section 305 if, when the building is first used, it is not an industrial building.

(2) An initial allowance which has been made in respect of a building which is to be an industrial building is to be withdrawn if, when the building is first used, it is not an industrial building.

(3) An initial allowance which has been made in respect of a building which has not been used is to be withdrawn if the person to whom the allowance was made sells the relevant interest before the building is first used.

(4) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this section.

Grants affecting entitlement to initial allowances

308

(1) No initial allowance is to be made in respect of expenditure to the extent that it is taken into account for the purposes of a relevant grant or relevant payment made towards that expenditure.

(2) A grant or payment is relevant if it is—

(a) a grant made under section 32, 34 or 56(1) of the Transport Act 1968 (c. 73),

(b) a payment made under section 56(2) of the Transport Act 1968, or

which is declared by the Treasury by order to be relevant for the purposes of the withholding of initial allowances.

(3) If a relevant grant or relevant payment towards the expenditure is made after the making of an initial allowance, the allowance is to be withdrawn to that extent.

(4) If the amount of the grant or payment is repaid by the grantee to the grantor, in whole or in part, the grant or payment is treated, to that extent, as never having been made.

(5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (3) or (4).

(6) Any such assessment or adjustment is not out of time if it is made within 3 years of the end of the chargeable period in which the grant, payment or repayment was made.

Chapter 6 — Writing-down allowances

Entitlement to writing-down allowance

309

(1) A person is entitled to a writing-down allowance for a chargeable period if—

(a) qualifying expenditure has been incurred on a building,

(b) at the end of that chargeable period, the person is entitled to the relevant interest in the building in relation to that expenditure, and

(2) A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount.

Basic rule for calculating amount of allowance

310

(1) The basic rule is that the writing-down allowance for a chargeable period is—

(a) in the case of qualifying enterprise zone expenditure, 25% of the expenditure, and

(b) in the case of other qualifying expenditure, 4% of the expenditure.

(2) The allowance is proportionately increased or reduced if the chargeable period is more or less than a year.

(3) This basic rule does not apply if section 311 applies.

Calculation of allowance after sale of relevant interest

311

(1) If a relevant event occurs, the writing-down allowance for any chargeable period ending after the event is—

$$RQExAB$where—RQE is the amount of the residue of qualifying expenditure immediately after the event,A is the length of the chargeable period, andB is the length of the period from the date of the event to the end of the period of 25 years beginning with the day on which the building was first used.$

(2) On any later relevant event, the writing-down allowance is further adjusted in accordance with this section.

(3) “Relevant event” means—

(a) a sale of the relevant interest in the building which is a balancing event to which section 314 applies, or

(b) an event which is a relevant event for the purposes of this section under section 347 or 349 (additional VAT liabilities and rebates).

Allowance limited to residue of qualifying expenditure

312

(1) The amount of the writing-down allowance for a chargeable period is limited to the residue of qualifying expenditure.

(2) For this purpose the residue is ascertained immediately before writing off the writing-down allowance at the end of the chargeable period.

Meaning of “the residue of qualifying expenditure”

313

The residue of qualifying expenditure is the qualifying expenditure that has not yet been written off in accordance with Chapter 8.

Chapter 7 — Balancing adjustments

General

When balancing adjustments are made

314

(1) A balancing adjustment is made if—

(a) qualifying expenditure has been incurred on a building, and

(b) a balancing event occurs while the building is an industrial building or after it has ceased to be an industrial building.

(2) A balancing adjustment is either a balancing allowance or a balancing charge and is made for the chargeable period in which the balancing event occurs.

(3) A balancing allowance or balancing charge is made to or on the person entitled to the relevant interest in the building immediately before the balancing event.

(4) No balancing adjustment is made if the balancing event occurs more than 25 years after the building was first used.

(5) If more than one balancing event within section 315(1) occurs during a period when the building is not an industrial building, a balancing adjustment is made only on the first of them.

Main balancing events

315

(1) The following are balancing events for the purposes of this Part—

(a) the relevant interest in the building is sold;

(b) if the relevant interest is a lease, the lease ends otherwise than on the person entitled to it acquiring the interest reversionary on it;

(d) the building ceases altogether to be used (without being demolished or destroyed);

(e) if the relevant interest depends on the duration of a foreign concession, the concession ends.

(2) “Foreign concession” means a right or privilege granted by the government of, or any municipality or other authority in, a territory outside the United Kingdom.

(3) Other balancing events are provided for by—

section 328 (realisation of capital value where site of building is in enterprise zone);

section 343 (ending of highway concession);

section 350 (additional VAT rebates and balancing adjustments);

and a balancing event under this section may also occur as a result of section 317 (hotel not qualifying hotel for 2 years).

Proceeds from main balancing events

316

(1) References in this Part to the proceeds from a balancing event within section 315(1) are to the amounts received or receivable in connection with the event, as shown in the Table—

1. Balancing event	2. Proceeds from event
1. The sale of the relevant interest.	The net proceeds of the sale.
2. The demolition or destruction of the building.	The net amount received for the remains of the building, together with—(a) any insurance money received in respect of the demolition or destruction, and(b) any other compensation of any description so received, so far as it consists of capital sums.
3. The building ceases altogether to be used.	Any compensation of any description received in respect of the event, so far as it consists of capital sums.
4. A foreign concession ends.	Any compensation payable in respect of the relevant interest.

(2) The amounts referred to in column 2 of the Table are those received or receivable by the person whose entitlement to a balancing allowance or liability to a balancing charge is in question.

Balancing event where hotel not qualifying hotel for 2 years

317

(1) This section applies if—

(a) a building ceases to be a qualifying hotel otherwise than on the occurrence of a balancing event which is within section 315(1), and

(b) after the building ceases to be a qualifying hotel, a period of 2 years elapses—

(i) in which it is not a qualifying hotel, and

(ii) without the occurrence of a balancing event.

(2) This Part has effect as if—

(a) the relevant interest in the building had been sold at the end of the 2 year period, and

(b) the net proceeds of the sale were equal to the market value of that interest.

(3) Subsection (2) does not affect section 285 (building treated as industrial building during period of temporary disuse).

(4) But a building is not to be treated under section 285(b) as continuing to be a qualifying hotel for more than 2 years after the end of the chargeable period in which it falls temporarily out of use.

(5) This section does not apply to qualifying enterprise zone expenditure.

Calculation of balancing adjustments

Building an industrial building etc. throughout

318

(1) This section provides for balancing adjustments where the building was—

(a) an industrial building, or

(b) used for research and development,

for the whole of the relevant period of ownership.

(2) A balancing allowance is made if—

(a) there are no proceeds from the balancing event, or

(b) the proceeds from the balancing event are less than the residue of qualifying expenditure immediately before the event.

(3) The amount of the balancing allowance is the amount of—

(a) the residue (if there are no proceeds);

(b) the difference (if the proceeds are less than the residue).

(4) A balancing charge is made if the proceeds from the balancing event are more than the residue, if any, of qualifying expenditure immediately before the event.

(5) The amount of the balancing charge is the amount of—

(a) the difference, or

(b) the proceeds (if the residue is nil).

Building not an industrial building etc. throughout

319

(1) This section provides for balancing adjustments where the building was not—

(a) an industrial building, or

(b) used for research and development,

for a part of the relevant period of ownership.

(2) A balancing allowance is made if—

(a) there are no proceeds from the balancing event or the proceeds are less than the starting expenditure, and

(b) the net allowances made are less than the adjusted net cost of the building.

(3) The amount of the balancing allowance is the amount of the difference between the adjusted net cost of the building and the net allowances made.

(4) A balancing charge is made if the proceeds from the balancing event are equal to or more than the starting expenditure.

(5) The amount of the balancing charge is an amount equal to the net allowances made.

(6) A balancing charge is also made if—

(a) there are no proceeds from the balancing event or the proceeds are less than the starting expenditure, and

(b) the net allowances made are more than the adjusted net cost of the building.

(7) The amount of the balancing charge is the amount of the difference between the net allowances made and the adjusted net cost of the building.

Overall limit on balancing charge

320

The amount of a balancing charge made on a person must not exceed the amount of the net allowances made.

Meaning of “the relevant period of ownership” etc.

The relevant period of ownership

321

The relevant period of ownership is the period beginning—

(a) with the day on which the building was first used for any purpose, or

(b) if the relevant interest has been sold after that day, with the day following that on which the sale (or the last such sale) occurred,

and ending with the day on which the balancing event occurs.

Starting expenditure

322

(1) This section gives the starting expenditure for the purposes of this Chapter.

(2) If the person to or on whom the balancing allowance or balancing charge falls to be made is the person who incurred the qualifying expenditure, that expenditure is the starting expenditure.

(3) Otherwise, the starting expenditure is the residue of qualifying expenditure at the beginning of the relevant period of ownership.

(4) If section 340 (treatment of demolition costs) applies, the starting expenditure is increased by an amount equal to the net cost of the demolition.

Adjusted net cost

323

The amount of the adjusted net cost is—

Net allowances

324

For the purposes of this Chapter, the amount of the net allowances made, in relation to any qualifying expenditure, is—

Balancing allowances restricted where sale subject to subordinate interest

325

(1) This section applies if—

(a) the relevant interest in a building is sold subject to a subordinate interest,

(b) the person entitled to the relevant interest immediately before the sale (“the former owner”) would, apart from this section, be entitled to a balancing allowance under this Chapter as a result of the sale, and

(2) Condition A is that—

(a) the former owner,

(b) the person who acquires the relevant interest, and

or any two of them, are connected persons.

(3) Condition B is that it appears that the sole or main benefit which might have been expected to accrue to the parties or any of them from the sale or the grant, or transactions including the sale or grant, was the obtaining of an allowance under this Part.

(4) For the purpose of deciding what balancing adjustment is to be made in a case to which this section applies, the net proceeds to the former owner of the sale are to be increased—

(a) by an amount equal to any premium receivable by him for the grant of the subordinate interest, and

(b) if no rent, or no commercial rent, is payable in respect of the subordinate interest, by the amount by which the proceeds would have been greater if a commercial rent had been payable and the relevant interest had been sold in the open market.

(5) But the net proceeds of the sale are not to be treated as being greater than the amount which secures that no balancing allowance is made.

(6) If the terms on which a subordinate interest is granted are varied before the sale of the relevant interest—

(a) any capital consideration for the variation is to be treated for the purposes of this section as a premium for the grant of the interest, and

(b) the question whether any, and if so what, rent is payable in respect of the interest is to be determined by reference to the terms in force immediately before the sale.

(7) If this section applies in relation to a sale to deny or reduce a balancing allowance, the residue of qualifying expenditure immediately after the sale is nevertheless calculated as if the balancing allowance had been made or not reduced.

Interpretation of section 325

326

(1) In section 325—

“commercial rent” means such rent as may reasonably be expected to have been required in respect of the subordinate interest (having regard to any premium payable for the grant of the interest) if the transaction had been at arm’s length;

“premium” includes any capital consideration, except so much of any sum as corresponds to — an amount brought into account as a receipt in calculating the profits of a property business under sections 217 to 221 of CTA 2009 that is calculated by reference to the sum, or an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum;

“subordinate interest” means an interest in or right over the building, whether granted by the former owner or anyone else.

(2) In section 325 and this section—

“capital consideration” means consideration which consists of a capital sum or would be a capital sum if it had consisted of a money payment, and

“rent” includes any consideration which is not capital consideration.

Qualifying enterprise zone expenditure: effect of realising capital value

Capital value provisions: application of provisions

327

Sections 328 to 331 apply only if expenditure on the construction of a building has been incurred—

(a) at a time—

(i) when the site of the building was wholly or mainly in an enterprise zone, and

(ii) which was not more than 10 years after the site was first included in the zone, or

(b) under a contract entered into at such a time.

Balancing adjustment on realisation of capital value

328

(1) There is a balancing event if, while the building is an industrial building or after it has ceased to be one, any capital value is realised.

(2) No balancing allowance is to be made because of a balancing event under this section.

(3) The amount of capital value realised is to be treated as the proceeds from the balancing event.

(4) If a balancing event under this section occurs—

(a) section 319 (balancing adjustment where building not an industrial building etc. throughout) has effect as if, immediately after the balancing event, the starting expenditure were reduced by the amount of capital value realised, and

(b) if the net proceeds of a sale of the relevant interest fall to be increased under section 325(4) (balancing allowances restricted where sale subject to subordinate interest), those proceeds as so increased are reduced by the amount of any capital value realised before the sale.

(5) Capital value is realised if an amount of capital value is paid which is attributable to an interest in land (“the subordinate interest”) to which the relevant interest in the building is or will be subject.

(6) The capital value is realised on the making of the payment.

(7) The amount of capital value realised is the amount of capital value that is attributable to the subordinate interest under section 329.

Capital value that is attributable to subordinate interest

329

(1) Capital value is attributable to the subordinate interest if it is paid—

(a) in consideration of the grant of the subordinate interest,

(b) instead of any rent payable by the person entitled to the subordinate interest,

(d) in consideration of—

(i) the surrender of the subordinate interest, or

(ii) the variation or waiver of any of the terms on which it was granted.

(2) If—

(a) no premium is given in consideration of the grant of the subordinate interest or any premium so given is less than the commercial premium, and

(b) no commercial rent is payable in respect of the subordinate interest,

capital value is attributable under subsection (1)(a) as if the commercial premium had been paid on and in consideration of the grant of the subordinate interest.

(3) If any value given instead of any rent payable by the person entitled to the subordinate interest is less than the commercial amount, capital value is attributable under subsection (1)(b) as if the commercial amount had been paid.

(4) If—

(a) any rent payable in respect of the subordinate interest is assigned, but

(b) no value is given in consideration of the assignment or any value so given is less than the commercial amount,

capital value is attributable under subsection (1)(c) as if the commercial amount had been given on and in consideration of the assignment.

(5) If—

(a) the subordinate interest is surrendered, or any of the terms on which the subordinate interest was granted are varied or waived, but

(b) no value is given in consideration of the surrender, variation or waiver or any value so given is less than the commercial amount,

capital value is attributable under subsection (1)(d) as if the commercial amount had been given on and in consideration of the surrender, variation or waiver.

(6) Capital value is not attributable to the subordinate interest if it is paid in consideration of the grant of a lease to which an election under section 290 (treating grant of lease exceeding 50 years as sale) applies.

Exception for payments more than 7 years after agreement

330

(1) Capital value is not realised for the purposes of section 328 if the payment is made more than 7 years after—

(a) the agreement under which the qualifying expenditure was incurred was entered into, or

(b) if that agreement was conditional, the time when the agreement became unconditional.

(2) If an agreement is made to pay in respect of any event an amount of capital value which would be attributable to the subordinate interest, and—

(a) the agreement is made, or if conditional becomes unconditional, before the end of the period of 7 years referred to in subsection (1), and

(b) the event occurs, or any payment in consideration of the event is made, after the end of that period,

the event or payment is treated for the purposes of subsection (1) as occurring or made before the end of the 7 years.

(3) Subsection (1) does not apply if arrangements—

(a) under which the person entitled to the relevant interest acquired it, or

(b) which were made in connection with its acquisition,

include provision which requires, or makes substantially more likely, any of the events set out in subsection (4).

(4) The events are—

(a) the subsequent sale of the relevant interest;

(b) the subsequent grant of an interest in land out of the relevant interest;

Capital value provisions: interpretation

331

(1) “Capital value” means any capital sum—

(a) including what would have been a capital sum if it had been a money payment (and references to payment are to be read accordingly), but

(b) excluding so much of any sum as corresponds to —

(i) an amount brought into account as a receipt in calculating the profits of a property business under sections 217 to 221 of CTA 2009 that is calculated by reference to the sum, or

(ii) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum.

(2) “Interest in land” means—

(a) a leasehold estate in the land, whether in the nature of a head lease, sub-lease or under-lease;

(b) an easement or servitude;

(3) References to granting an interest in land include agreeing to grant any such interest.

(4) In section 329—

“commercial amount” means the amount that would have been given if the transaction had been at arm’s length,

“commercial premium” means the premium that would have been given if the transaction had been at arm’s length, and

“commercial rent” means such rent as may reasonably be expected to have been required in respect of the subordinate interest (having regard to any premium paid in consideration of the grant of the interest) if the transaction had been at arm’s length.

(5) In the application of section 329 to Scotland, references to assignment are to be read as references to assignation.

Chapter 8 — Writing off qualifying expenditure

Introduction

332

For the purposes of this Part qualifying expenditure is written off to the extent and at the times specified in this Chapter.

Writing off initial allowances

333

If an initial allowance is made in respect of the qualifying expenditure, the amount of the allowance is written off at the time when the building is first used.

Writing off writing-down allowances

334

(1) If a writing-down allowance is made in respect of the qualifying expenditure, the amount of the allowance is written off at the end of the chargeable period for which the allowance is made.

(2) If a balancing event occurs at the end of the chargeable period referred to in subsection (1), the amount written off under that subsection is to be taken into account in calculating the residue of qualifying expenditure immediately before the event to determine what balancing adjustment (if any) is to be made.

Writing off research and development allowances

335

(1) If an allowance under Part 6 (research and development allowances) is made in respect of the qualifying expenditure, the amount of the allowance is written off at the end of the chargeable period for which the allowance is made.

(2) If a balancing event occurs at the end of the chargeable period referred to in subsection (1), the amount written off under that subsection is to be taken into account in calculating the residue of qualifying expenditure immediately before that event to determine what balancing adjustment (if any) is to be made.

Writing off expenditure when building not an industrial building

336

(1) This section applies if for any period or periods between—

(a) the time when the building was first used for any purpose, and

(b) the time when the residue of qualifying expenditure falls to be ascertained,

the building was not an industrial building.

(2) An amount equal to the notional writing-down allowances for the period or periods is written off at the time when the residue falls to be ascertained.

(3) The notional writing-down allowances are the allowances that would have been made for the period or periods in question (if the building had remained an industrial building), at such rate or rates as would have been appropriate having regard to any relevant sale.

(4) In subsection (3) “relevant sale” means a sale of the relevant interest as a result of which a balancing adjustment falls to be made under section 314.

Writing off or increase of expenditure where balancing adjustment made

337

(1) This section applies if the relevant interest in the building is sold.

(2) If a balancing allowance is made, the amount by which the residue of qualifying expenditure before the sale exceeds the net proceeds of the sale is written off at the time of the sale.

(3) If a balancing charge is made, the amount of the residue of qualifying expenditure is increased at the time of the sale by the amount of the charge.

(4) But if the balancing charge is made under section 319(6) (difference between net allowances made and adjusted net cost), the residue of qualifying expenditure immediately after the sale is limited to the net proceeds of the sale.

Writing off capital value which has been realised

338

If a balancing event within section 328 occurs (realisation of capital value), an amount equal to any capital value realised is written off at the time of the event.

Crown or other person not within the charge to tax entitled to the relevant interest

339

(1) This section applies if at any time—

(a) the Crown, or

(b) a person who is not within the charge to tax,

(“A”) is entitled to the relevant interest in a building.

(2) Sections 333 to 338 (writing off qualifying expenditure) have effect as if all writing-down allowances and balancing adjustments had been made as could have been made if—

(a) a person (“B”) who—

(i) is not the Crown,

(ii) is within the charge to tax, and

(iii) is not a company,

had been entitled to the relevant interest, and

(b) the other assumptions in subsection (3) had been made.

(3) The assumptions are that—

(a) while A was entitled to the relevant interest, all things which were done in relation to the building—

(i) by or to A, or

(ii) by or to a person using the building under the authority of A,

were done by or to B for the purposes of, and in the course of, a trade carried on by B,

(b) any sale of the relevant interest in the building by or on behalf of A was made in connection with the termination of the trade carried on by B, and

(c) B’s periods of account for that trade had, in the case of each tax year, ended immediately before the beginning of the next tax year.

Treatment of demolition costs

340

(1) This section applies if—

(a) a building is demolished, and

(b) the person to or on whom any balancing allowance or balancing charge is or might be made is the person incurring the cost of the demolition.

(2) The net cost of the demolition is added to the residue of qualifying expenditure immediately before the demolition.

(3) “The net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the property.

(4) If this section applies, neither the cost of the demolition nor the net cost of the demolition is treated for the purposes of any Part of this Act other than Part 10 (assured tenancy allowances) as expenditure on any other property replacing the property demolished.

Chapter 9 — Highway undertakings

Carrying on of highway undertakings

341

(1) For the purposes of this Part the carrying on of a highway undertaking is to be treated as the carrying on of an undertaking by way of trade; and accordingly references in this Part (except sections 274 and 276) to a trade include a highway undertaking.

(2) For the purposes of this Part a person carrying on a highway undertaking is to be treated as occupying, for the purposes of the undertaking, any road in relation to which it is carried on.

(3) In this Chapter “highway undertaking” has the meaning given in item 6 of Table B in section 274.

(4) In that item and this Chapter “highway concession”, in relation to a road, means—

(a) a right to receive sums from the relevant authority because the road is or will be used by the general public, or

(b) if the road is a toll road, the right to charge tolls in respect of the road.

(5) In subsection (4) “ the relevant authority ” means—

(a) the Secretary of State,

(b) the Scottish Ministers,

(d) the Department for Regional Development in Northern Ireland.

The relevant interest

342

(1) For the purposes of Chapter 3 (the relevant interest in the building) as it applies to expenditure incurred on the construction of a road, a highway concession is not to be treated as an interest in the road.

(2) But if the person who incurred the expenditure on the construction of the road—

(a) was not entitled to an interest in the road when he incurred the expenditure, but

(b) was at that time entitled to a highway concession in respect of the road,

the highway concession is to be treated as the relevant interest in relation to that expenditure.

(3) Any question as to what is the relevant interest is to be determined on the assumption that, if section 344 (renewed or new concession treated as extension of earlier concession) applies, the renewed or new concession is a continuation of the earlier concession.

Balancing adjustment on ending of concession

343

(1) If—

(a) the relevant interest is a highway concession, and

(b) the concession is brought to or comes to an end without being treated as extended under section 344,

the ending of the concession is a balancing event.

(2) The proceeds from such a balancing event are—

(a) any insurance money received by the person entitled to the highway concession in respect of any qualifying expenditure, and

(b) other compensation so received so far as it consists of capital sums.

Cases where highway concession is to be treated as extended

344

(1) A highway concession in respect of a road is to be treated as extended if—

(a) the person entitled to the concession takes up a renewed concession in respect of the whole or a part of the road, or

(b) that person or a person connected with him takes up a new concession in respect of—

(i) the whole or a part of the road, or

(ii) a road that includes the whole or a part of the road.

(2) But the concession is to be treated as extended only—

(a) to the extent that the concession which has in fact ended, and the renewed or new concession, relate to the same road, and

(b) for the period of the renewed or new concession.

(3) A person takes up a renewed or new concession if he is afforded, whether or not under legally enforceable arrangements, an opportunity to be granted the renewed or new concession and takes advantage of the opportunity.

(4) For the purposes of subsection (3) it does not matter whether the renewed or new concession is on the same terms as the previous concession or on modified terms.

(5) If—

(a) a highway concession is treated as extended under this section, and

(b) the period of the extension is different in relation to different parts of the road in relation to which the concession has been granted,

such apportionments are to be made for the purposes of section 343 as are just and reasonable.

Chapter 10 — Additional VAT liabilities and rebates

Introduction

345

For the purposes of this Chapter—

(a) “additional VAT liability” and “additional VAT rebate” have the meaning given by section 547,

(b) the time when—

(i) a person incurs an additional VAT liability, or

(ii) an additional VAT rebate is made to a person,

is given by section 548, and

(c) the chargeable period in which, and the time when, an additional VAT liability or an additional VAT rebate accrues are given by section 549.

Additional VAT liabilities

Additional VAT liabilities and initial allowances

346

(1) This section applies if—

(a) a person was entitled to an initial allowance in respect of qualifying enterprise zone expenditure,

(b) the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure,

(i) occupied by the person entitled to the relevant interest or a qualifying lessee, or

(ii) used by a qualifying licensee, and

(d) the additional VAT liability is incurred not more than 10 years after the site of the building was first included in the enterprise zone.

(2) If this section applies, the person entitled to the relevant interest is entitled to an initial allowance on the amount of the additional VAT liability.

(3) The amount of the initial allowance is 100% of the amount of the additional VAT liability.

(4) A person claiming an initial allowance under this section may require the allowance to be reduced to a specified amount.

(5) The allowance is made for the chargeable period in which the additional VAT liability accrues.

(6) The persons mentioned in subsection (1)(a) and (b) need not be the same.

Additional VAT liabilities and writing-down allowances

347

(1) This section applies if the person entitled to the relevant interest in relation to qualifying expenditure incurs an additional VAT liability in respect of that expenditure.

(2) If this section applies—

(a) the additional VAT liability is treated as qualifying expenditure, and

(b) the amount of the residue of qualifying expenditure is accordingly increased at the time when the liability accrues by the amount of the liability.

(3) The incurring of the additional VAT liability is a relevant event for the purposes of section 311 (calculation of writing-down allowances) that is to be treated as occurring at the time when the liability accrues.

Additional VAT liabilities and writing off initial allowances

348

If an initial allowance is made in respect of an additional VAT liability incurred after the building is first used, the amount of the allowance is written off at the time when the liability accrues.

Additional VAT rebates

Additional VAT rebates and writing-down allowances

349

(1) This section applies if—

(a) an additional VAT rebate is made in respect of qualifying expenditure to the person entitled to the relevant interest in relation to that qualifying expenditure, and

(b) immediately before the rebate accrues, the residue of that qualifying expenditure is equal to, or greater than, the amount of the rebate.

(2) The making of the additional VAT rebate is a relevant event for the purposes of section 311 (calculation of writing-down allowances) that is to be treated as occurring at the time when the rebate accrues.

Additional VAT rebates and balancing adjustments

350

(1) If an additional VAT rebate is made in respect of qualifying expenditure to the person entitled to the relevant interest in relation to that qualifying expenditure—

(a) the making of the rebate is a balancing event for the purposes of this Part, but

(b) the making of balancing adjustments as a result of the event is subject to subsections (2) and (3).

(2) No balancing allowance is to be made as a result of the event.

(3) A balancing charge is not to be made as a result of the event unless—

(a) the amount of the additional VAT rebate is more than the amount of the residue of qualifying expenditure immediately before the time when the rebate accrues, or

(b) there is no such residue.

(4) The amount of the balancing charge is—

(a) the amount of the difference, or

(b) the amount of the rebate (if there is no residue).

(5) If a balancing charge is made under this section, the starting expenditure is reduced by the amount of that charge in a case where section 322(2) applies (person subject to balancing adjustment is the person who incurred the qualifying expenditure).

Additional VAT rebates and writing off qualifying expenditure

351

If an additional VAT rebate is made in respect of qualifying expenditure, an amount equal to the rebate is written off at the time when the rebate accrues.

Chapter 11 — Giving effect to allowances and charges

Trades

352

(1) An allowance or charge to which a person is entitled or liable under this Part is to be given effect in calculating the profits of that person’s trade, by treating—

(a) the allowance as an expense of the trade, and

(b) the charge as a receipt of the trade.

(2) In the case of a person who—

(a) is entitled to an allowance or liable to a charge in respect of a commercial building, and

(b) occupies the building in the course of a profession or vocation,

the references in subsection (1) to a trade are to be read as references to the profession or vocation.

(3) Subsection (1) is subject to the following provisions of this Chapter.

Lessors and licensors

353

(1) This section applies if—

(a) a person is entitled or liable to an allowance or charge for a chargeable period (“the relevant period”), but

(b) his interest in the building in question is or was subject to a lease or a licence at the relevant time.

(2) If the person’s interest in the building is an asset of a UK property business... carried on by him at any time in the relevant period, the allowance or charge is to be given effect in calculating the profits of that business for the relevant period, by treating—

(a) the allowance as an expense of that business, and

(b) the charge as a receipt of that business.

(3) If the person’s interest in the building is an asset of an overseas property business carried on by him at any time in the relevant period, the allowance or charge is to be given effect in calculating the profits of the overseas property business for the relevant period, by treating—

(a) the allowance as an expense of that business, and

(b) the charge as a receipt of that business.

(3A) If the person is within the charge to income tax in respect of the allowance or charge and his interest in the building is not an asset of any property business carried on by him at any time in the relevant period, the allowance or charge is to be given effect by treating him as if he had been carrying on a UK property business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.

(4) If the person is a company within the charge to corporation tax in respect of the allowance or charge and its interest in the building is not an asset of any property business carried on by it at any time in the relevant period, the allowance or charge is to be given effect by treating the company as if it had been carrying on a UK property business in that period and as if—

(a) the allowance were an expense of that business, and

(b) the charge were a receipt of that business.

(5) In subsection (1) “the relevant time” means—

(a) in relation to an initial allowance, the time when the expenditure was incurred or any subsequent time before the building is used for any purpose;

(b) in relation to a writing-down allowance, the end of the relevant period;

(c) in relation to a balancing allowance or balancing charge, the time immediately before the event giving rise to the allowance or charge.

Buildings temporarily out of use

354

(1) This section applies if a person is entitled to an allowance or liable to a charge for a chargeable period during which the building is treated as an industrial building under section 285 (building still industrial building despite temporary disuse).

(2) If, when the building was last in use as an industrial building—

(a) it was in use for the purposes of a trade which has since been permanently discontinued, or

(b) the relevant interest in the building was subject to a lease or a licence which has since come to an end,

section 353(4) applies to the person as if the relevant interest were subject to a lease or licence at the relevant time.

(3) If—

(a) the person is liable to a balancing charge, and

(b) when the building was last in use as an industrial building, it was in use as an industrial building for the purposes of a trade which was carried on by the person but which has since been permanently discontinued,

the same deductions may be made from the amount of the balancing charge as may be made under section 254 of ITTOIA 2005 or section 196 of CTA 2009 (deductions allowed in case of post-cessation receipts) from an amount chargeable to tax under Chapter 18 of Part 2 of ITTOIA 2005 or, as the case may be, under Chapter 15 of Part 3 of CTA 2009.

(4) Subsection (3) does not affect the making of any deduction allowed under any other provision of the Tax Acts.

(5) For the purposes of this section the permanent discontinuance of a trade does not include an event treated as a permanent discontinuance under section 577(2A) of this Act or section 18 of ITTOIA 2005 (effect of company ceasing to trade etc).

(6) In this section “trade”, in relation to a commercial building, includes a profession or vocation.

Buildings for miners etc.: carry-back of balancing allowances

355

(1) This section applies if—

(a) a trade consists of or includes the working of a source of mineral deposits (within the meaning of item 7 of Table A in section 274),

(b) a balancing allowance falls to be made under this Part for the last chargeable period in which the trade is carried on,

(i) the source of mineral deposits ceasing to be worked, or

(ii) the coming to an end of a foreign concession,

(d) the allowance is made for expenditure on a building which was constructed for occupation by, or for the welfare of, persons employed at or in connection with the working of the source of mineral deposits, and

(e) full effect cannot be given to the allowance because there are insufficient profits for that chargeable period.

(2) If this section applies, the person entitled to the allowance may claim that the balance of the allowance is to be given for the last preceding chargeable period, and so on for other preceding chargeable periods.

(2A) For income tax purposes the allowance is given effect at Step 2 of the calculation in section 23 of ITA 2007.

(3) But allowances are not to be given under subsection (2) for chargeable periods amounting in total to more than 5 years; but a proportionately reduced allowance may be given for a chargeable period of which part is required to make up the 5 years.

(4) In counting the 5 years, include any period for which an allowance might be made but cannot be given effect because there are insufficient profits.

(5) If this section applies to a company, no allowance may be given under this section so as to create or increase a loss in any accounting period.

(6) If this section applies to a company and a claim is made both under this section and under section 37 of CTA 2010 (relief for company trading losses)—

(a) effect is to be given to the claim under that section before this section is applied, and

(b) for the purposes of giving effect to the claim under that section, the allowance for which the claim under this section is made is to be disregarded.

Chapter 12 — Supplementary provisions

Apportionment of sums partly referable to non-qualifying assets

356

(1) If the sum paid for the sale of the relevant interest in a building is attributable—

(a) partly to assets representing expenditure for which an allowance can be made under this Part, and

(b) partly to assets representing other expenditure,

only so much of the sum as on a just and reasonable apportionment is attributable to the assets referred to in paragraph (a) is to be taken into account for the purposes of this Part.

(2) Subsection (1) applies to other proceeds from a balancing event in respect of a building as it applies to a sum given for the sale of the relevant interest in the building.

(3) Subsection (1) does not affect any other provision of this Act requiring an apportionment of the proceeds of a balancing event.

Arrangements having an artificial effect on pricing

357

(1) If—

(a) the relevant interest in a building is sold,

(b) related arrangements have been entered into, at or before the time when the sale price is fixed, which had the effect at that time of enhancing the value of the relevant interest, and

the sum paid on the sale of the relevant interest is to be treated for the purposes of arriving at qualifying expenditure as reduced to what it would have been if the arrangements had not contained the provision having that artificial effect.

(2) If—

(a) qualifying expenditure is equal to a price paid on a sale of the relevant interest in a building,

(b) related arrangements have been entered into, at or before the time when the sale price is fixed, which had the effect at that time of enhancing the value of the relevant interest, and

the proceeds from any balancing event subsequently occurring in relation to the building are to be treated for the purposes of this Part as reduced to what they would have been if the arrangements had not contained the provision having that artificial effect.

(3) “Related arrangements” means arrangements between two or more persons which relate—

(a) to an interest in or right over the building, or

(b) to other arrangements made with respect to such an interest or right;

and for this purpose it is immaterial whether the interest or right in question is granted by the person entitled to the relevant interest or another person.

(4) Arrangements contain a provision having an artificial effect on pricing to the extent that they go beyond what could reasonably have been regarded as required in comparable commercial transactions by the market conditions prevailing when the arrangements were entered into.

(5) “Comparable commercial transactions” means transactions—

(a) involving interests in or rights over buildings of the same kind as (or of a similar kind to) the building to which the arrangements relate, and

(b) made by persons dealing with each other at arm’s length in the open market.

Requisitioned land

358

(1) This section applies in relation to any period (“period of requisition”) for which compensation—

(a) is payable, or

(b) but for any agreement would be payable,

under section 2(1)(a) of the Compensation (Defence) Act 1939 (c. 75).

(2) This Part has effect in relation to the period of requisition as if the Crown had been in possession of the land for that period under a lease.

(3) If a person carrying on a trade is authorised by the Crown to occupy the land (or part of it) during the whole or a part of the period of requisition, this Part has effect as if the Crown had granted a sub-lease of the land (or that part of it) to the occupier.

(4) If subsection (2) or (3) applies, references in this Part to—

(a) the surrender of a leasehold interest,

(b) a leasehold interest being extinguished on the person entitled to it acquiring the interest which is reversionary on it, or

apply (with the necessary modifications) in relation to the lease under subsection (2) or the sub-lease under subsection (3).

(5) If the person who (subject to the rights of the Crown) is entitled to possession of the land pays any sum to—

(a) the Crown, or

(b) if subsection (3) applies, the occupier,

in respect of a building constructed on the land during the period of requisition, the sum is to be treated for the purposes of this Part as paid in consideration of the surrender of the lease or sub-lease (as the case may be).

Provisions applying on termination of lease

359

(1) This section applies for the purposes of this Part if a lease is terminated.

(2) If, with the consent of the lessor, the lessee of a building remains in possession of the building after the termination without a new lease being granted to him the lease is treated as continuing so long as the lessee remains in possession.

(3) If on the termination a new lease is granted to the lessee as a result of the exercise of an option available to him under the terms of the first lease, the second lease is treated as a continuation of the first.

(4) If on the termination the lessor pays a sum to the lessee in respect of a building comprised in the lease, the lease is treated as if it had come to an end by surrender in consideration of the payment.

(5) If on the termination—

(a) another lease is granted to a different lessee, and

(b) in connection with the transaction that lessee pays a sum to the person who was the lessee under the first lease,

the two leases are to be treated as if they were the same lease which had been assigned by the lessee under the first lease to the lessee under the second lease in consideration of the payment.

Meaning of “lease” etc.

360

(1) In this Part “lease” includes—

(a) an agreement for a lease if the term to be covered by the lease has begun, and

(b) any tenancy,

but does not include a mortgage (and “lessee”, “lessor” and “leasehold interest” are to be read accordingly).

(2) In the application of this Part to Scotland—

(a) “leasehold interest” (or “leasehold estate”) means the interest of a tenant in property subject to a lease, and

(b) any reference to an interest which is reversionary on a leasehold interest or on a lease is to be read as a reference to the interest of the landlord in the property subject to the leasehold interest or lease.

Part 4 — Agricultural buildings allowances

Chapter 1 — Introduction

Agricultural buildings allowances

361

(1) Allowances are available under this Part if—

(a) capital expenditure has been incurred on the construction of a building (such as a farmhouse, farm building or cottage) or on the construction of fences or other works,

(b) the expenditure was incurred—

(i) by a person having a freehold or leasehold interest in land in the United Kingdom occupied wholly or mainly for the purposes of husbandry, and

(ii) for the purposes of husbandry on that land, and

(2) In this Part—

(a) “agricultural building” means a building, fence or other works referred to in subsection (1)(a), and

(b) “the related agricultural land” means the land referred to in subsection (1)(b).

(3) Allowances under this Part are made to the person who for the time being has the relevant interest (see Chapter 2) in relation to the qualifying expenditure (see Chapter 3).

Meaning of “husbandry”

362

(1) In this Part “husbandry” includes—

(a) any method of intensive rearing of livestock or fish on a commercial basis for the production of food for human consumption, and

(b) the cultivation of short rotation coppice.

(2) “Short rotation coppice” has the meaning given by section 1125(6) of CTA 2010 (meaning for corporation tax purposes: tree species planted at high density where stems harvested at intervals of less than 10 years).

Expenditure on the construction of a building

363

For the purposes of this Part, expenditure on the construction of a building does not include expenditure incurred on the acquisition of land or rights in or over land.

Chapter 2 — The relevant interest

General rule as to what is the relevant interest

364

(1) The relevant interest in relation to any qualifying expenditure is the freehold or leasehold interest in the related agricultural land to which the person who incurred the expenditure on the construction of the agricultural building was entitled when the expenditure was incurred.

(2) Subsection (1) is subject to the following provisions of this Chapter.

(3) If, when the expenditure was incurred—

(a) the person was entitled to freehold and leasehold interests or to more than one leasehold interest in the related agricultural land, and

(b) one of those interests was reversionary on all the others,

the reversionary interest is the relevant interest.

Effect of creation of subordinate lease

365

An interest does not cease to be the relevant interest merely because of the creation of a lease or other interest to which that interest is subject.

Interest conveyed or assigned by way of security

366

If an interest in land is—

(a) conveyed or assigned by way of security, and

(b) subject to a right of redemption,

the person with the right of redemption is treated for the purposes of this Part as having that interest, and not the creditor.

Merger of leasehold interest

367

(1) If the relevant interest is a leasehold interest which is extinguished on—

(a) being surrendered, or

(b) the person entitled to it acquiring the interest which is reversionary on it,

the interest into which the leasehold interest merges becomes the relevant interest when the leasehold interest is extinguished.

(2) If the person who owns the interest into which the leasehold interest is merged is not the same as the person who owned the leasehold interest, the relevant interest is to be treated for the purposes of this Part as acquired by the owner of the interest into which the leasehold interest is merged.

(3) Subsection (1) does not apply if a new lease of the whole or a part of the related agricultural land is granted to take effect on the extinguishment of the former leasehold interest.

Provisions applying on ending of lease

368

(1) This section applies if—

(a) a lease which is the relevant interest comes to an end, and

(b) section 367(1) does not apply.

(2) If a new lease of the whole or a part of the related agricultural land is granted to the same lessee, the lessee is to be treated as continuing to have the same relevant interest in the whole of the related agricultural land.

(3) If—

(a) a new lease of the whole or a part of the related agricultural land is granted to a different lessee, and

(b) that lessee (“the incoming lessee”) makes a payment to the outgoing lessee in respect of assets representing the qualifying expenditure,

the incoming lessee is to be treated as acquiring the relevant interest in the whole of the related agricultural land.

(4) In any other case, the former lease and the interest of the lessor under it are to be treated as the same interest; and so the relevant interest in the whole of the related agricultural land is to be treated as acquired by the lessor.

Chapter 3 — Qualifying expenditure

Capital expenditure on construction of agricultural building

369

(1) If—

(a) capital expenditure has been incurred on the construction of an agricultural building,

(b) the expenditure was incurred for the purposes of husbandry as mentioned in section 361, and

(c) the relevant interest has not been sold or, if it has been sold, has been sold only after the first use of the building,

the capital expenditure is qualifying expenditure.

(2) Subsections (3) and (4) apply if the capital expenditure has been incurred on the construction of a farmhouse.

(3) If the accommodation and amenities of the farmhouse are proportionate to the nature and extent of the farm, only one third of the capital expenditure is to be taken into account under subsection (1).

(4) If they are disproportionate, only such part of the expenditure as is just and reasonable (and not exceeding one third) is to be taken into account under subsection (1).

(5) If—

(a) the capital expenditure is incurred on the construction of any agricultural building other than a farmhouse, and

(b) the building is to be used partly for the purposes of husbandry on the related agricultural land and partly for other purposes,

only such part of the expenditure as, on a just and reasonable apportionment, is referable to use for the purposes of husbandry is to be taken into account under subsection (1).

Purchase of relevant interest before first use of agricultural building

370

(1) This section applies if—

(a) capital expenditure has been incurred on the construction of an agricultural building,

(b) the expenditure was incurred for the purposes of husbandry as mentioned in section 361,

(d) a capital sum is paid by the purchaser for the relevant interest.

(2) The lesser of—

(a) the capital expenditure incurred on the construction of the agricultural building, and

(b) the capital sum paid by the purchaser,

is qualifying expenditure.

(3) For the purposes of subsections (1) and (2)—

(a) capital expenditure incurred on the construction of the agricultural building does not include any amount excluded from being taken into account under section 369(3) to (5), and

(b) the capital sum paid by the purchaser for the relevant interest does not include any amount which, on a just and reasonable apportionment, is attributable to assets representing expenditure in respect of which an allowance cannot be made under this Part.

(4) Subsection (3)(b) does not affect sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).

(5) The qualifying expenditure is to be treated as incurred when the capital sum became payable.

(6) If the relevant interest is sold more than once before the building is first used, subsection (2) has effect only in relation to the last of those sales.

371

If a person is entitled to different relevant interests in different parts of the related agricultural land—

(a) the expenditure is to be apportioned between those parts on a just and reasonable basis, and

(b) this Part applies as if the person had incurred the expenditure apportioned to each part separately.

Chapter 4 — Writing-down allowances

Entitlement to writing-down allowance

372

(1) A person is entitled to a writing-down allowance for a chargeable period if—

(a) qualifying expenditure has been incurred,

(b) at any time during that chargeable period he is entitled to the relevant interest in relation to the qualifying expenditure, and

(2) The writing-down period, in relation to qualifying expenditure incurred by a person, is 25 years beginning with the first day of the chargeable period of that person in which the qualifying expenditure was incurred.

(3) A person claiming a writing-down allowance may require the allowance to be reduced to a specified amount.

Basic rule for calculating amount of allowance

373

(1) The basic rule is that the writing-down allowance for a chargeable period is 4% of the qualifying expenditure.

(2) The allowance is proportionately increased or reduced if the chargeable period is more or less than a year.

First use of building not for purposes of husbandry, etc.

374

(1) No writing-down allowance is to be made under section 372 if, when the agricultural building is first used, it is not used for the purposes of husbandry.

(2) Any writing-down allowance which has been made in respect of an agricultural building which has not been used is to be withdrawn if—

(a) when the building is first used, it is not used for the purposes of husbandry, or

(b) the person to whom the allowance was made sells the relevant interest before the building is first used.

(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this section.

Effect of acquisition of relevant interest after first use of building

375

(1) This section applies if—

(a) a person (“the former owner”) would be entitled to an allowance under this Part in respect of any expenditure if he continued to be the owner of the relevant interest, and

(b) another person (“the new owner”) acquires the relevant interest in the whole or a part of the related agricultural land.

(2) For the purposes of subsection (1)(b), it is immaterial whether the relevant interest is acquired by transfer, by operation of law or otherwise.

(3) The former owner—

(a) is not entitled to an allowance for any chargeable period after that in which the acquisition occurs, and

(b) if the acquisition occurs during a chargeable period, is entitled only to an appropriate part of any writing-down allowance for that period.

(4) The new owner—

(a) is entitled to allowances for the chargeable period in which the acquisition occurs and for subsequent chargeable periods falling wholly or partly within the writing-down period, and

(b) if the acquisition occurs during a chargeable period, is entitled only to an appropriate part of any writing-down allowance for that period.

(5) If the new owner acquires the relevant interest in part only of the related agricultural land, subsections (3) and (4) apply to so much only of the allowance as is properly referable to that part of the agricultural land as if it were a separate allowance.

Calculation of allowance after acquisition

376

(1) This section applies if—

(a) section 375 applies, and

(b) the acquisition is a balancing event under section 381 (as a result of an election made in accordance with section 382).

(2) The writing-down allowance for a chargeable period ending after the event is—

$$RQExAB$where—RQE is the residue of qualifying expenditure immediately after the event,A is the length of the chargeable period, andB is the length of the period from the date of the event to the end of the writing-down period.$

(3) On any later acquisition that is a balancing event under section 381, the writing-down allowance is further adjusted in accordance with this section.

(4) The residue of qualifying expenditure immediately after a balancing event is calculated as mentioned in section 386, taking into account any balancing adjustment falling to be made on the event.

(5) For this purpose, any balancing allowance on that or any previous balancing event which is reduced or denied under section 389 (sale subject to subordinate interest) is to be treated as having been made in full.

(6) The allowance is proportionately reduced if the person entitled to the allowance is not entitled to the relevant interest in relation to the expenditure in question during part of the chargeable period.

Chargeable period when balancing adjustment made

377

A person is not entitled to a writing-down allowance for a chargeable period in which a balancing allowance or balancing charge is made to or on him in respect of the qualifying expenditure.

Allowance limited to residue of qualifying expenditure

378

(1) The amount of a writing-down allowance for a chargeable period is limited to the residue of qualifying expenditure immediately before it is made or would, apart from this section, be made.

(2) The residue of qualifying expenditure is calculated in accordance with section 386.

Final writing-down allowance

379

(1) In this section “the final writing-down allowance” means the writing-down allowance which is made—

(a) to the person who is entitled to the relevant interest when the writing-down period ends, and

(b) for the chargeable period in which it ends.

(2) If the final writing-down allowance would, apart from this section, be less than the amount of the residue of qualifying expenditure immediately before it is made, the allowance is increased to that amount.

(3) When determining the residue of qualifying expenditure under section 386 for the purposes of subsection (2), assume that all such writing-down allowances have been made to the persons who have been entitled to the relevant interest during the writing-down period as could have been made if each of them—

(a) had been entitled to allowances, and

(b) had claimed allowances in full.

Chapter 5 — Balancing adjustments

General

When balancing adjustments are made

380

(1) A balancing adjustment is made if—

(a) qualifying expenditure has been incurred, and

(b) a balancing event occurs in a chargeable period for which a person would (apart from this section) be entitled to a writing-down allowance.

(2) A balancing adjustment is either a balancing allowance or a balancing charge and is made for the chargeable period in which the balancing event occurs.

(3) A balancing allowance or balancing charge is made to or on the person entitled to the relevant interest in relation to the qualifying expenditure immediately before the balancing event.

Balancing events (on making an election)

381

(1) Any event described in subsection (2) is a balancing event, but only if an election is made in accordance with section 382 for it to be treated as such.

(2) The events are—

(a) the relevant interest is acquired as mentioned in section 375;

(b) the agricultural building is demolished or destroyed;

Requirements as to elections

382

(1) An election relating to an event within section 381(2)(a) must be made jointly by the former owner and the new owner.

(2) No election relating to such an event may be made if it appears that the sole or main benefit which might have been expected to accrue to the parties, or any of them, from—

(a) the acquisition, or

(b) transactions of which the acquisition is one,

is the obtaining of an allowance, or a greater allowance, under this Part.

(3) In determining for the purposes of subsection (2) what benefit might have been expected to accrue, sections 568 and 573 (sales treated as being for alternative amount) are to be disregarded.

(4) An election relating to an event within section 381(2)(b) or (c) must be made by the person entitled to the relevant interest immediately before the event.

(5) No election relating to any event may be made if any person by whom the election is to be made is not within the charge to tax.

(6) The election must be made by notice given to the an officer of Revenue and Customs—

(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends;

(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(7) “The relevant chargeable period” means the chargeable period in which the event in question occurs.

Proceeds from balancing events

383

(1) References in this Part to the proceeds from a balancing event are to the amounts received or receivable in connection with the event, as shown in the Table—

1. Balancing event	2. Proceeds from event
1. The sale of the relevant interest.	The net proceeds of the sale.
2. The acquisition of the relevant interest under section 368(3) (ending of lease where incoming lessee makes payment to outgoing lessee).	The net amount of the payment to the outgoing lessee.
3. The demolition or destruction of the agricultural building.	The net amount received for the remains of the building, together with—(a) any insurance money received in respect of the demolition or destruction, and(b) any other compensation of any description so received, so far as it consists of capital sums.
4. The agricultural building ceases altogether to be used.	Any compensation of any description received in respect of the event, so far as it consists of capital sums.

(2) The amounts referred to in column 2 of the Table are those received or receivable by the person whose entitlement to a balancing allowance or liability to a balancing charge is in question.

Exclusion of proportion of proceeds

384

(1) The amounts referred to in column 2 of the Table in section 383 do not include any amount which, on a just and reasonable apportionment, is attributable to assets representing expenditure in respect of which an allowance cannot be made under this Part.

(2) If the qualifying expenditure in respect of which the balancing adjustment is made was restricted as a result of—

(a) subsection (3) or (4) of section 369 (restrictions on expenditure on farmhouse), or

(b) subsection (5) of that section (restriction on expenditure on buildings to be used partly for purposes other than husbandry),

a corresponding proportion only of the amounts referred to in the Table in section 383 is to be treated as proceeds from the balancing event.

(3) Subsection (1) does not affect sections 562, 563 and 564(1) (apportionment and procedure for determining apportionment).

Calculation of balancing adjustments

Calculation of balancing adjustment

385

(1) A balancing allowance is made if—

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