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HMRC internal manual

Capital Allowances Manual

From
HM Revenue & Customs
Updated
, see all updates

General: Contributions: Contributions towards IBA expenditure

CAA01/S539 & S542, FA08/S84 and Sch.27/Para 9

The provisions giving IBA on contributions towards expenditure on an industrial building were omitted by FA08, in relation to chargeable periods beginning on or after 1 April 2011 for CT purposes or 6 April 2011 for IT purposes.

For chargeable periods beginning before those dates, a person who makes a contribution towards another person’s expenditure can claim IBA on that contribution if:

* the general conditions for a contributions allowance are satisfied [CA14400](https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca14400), and 
* the person makes the contribution for the purposes of a trade etc. that is carried on or to be carried on by that person or by a tenant of land in which the person has an interest. 
  
The contribution is treated: 

    * as expenditure on an asset similar to the one towards which the contribution was made (a virtual asset), 
    * as if that virtual asset were in use for the purposes of the trade etc., and 
    * as if the contributor had the relevant interest in the virtual asset. 
  
    If the contribution is made for the purposes of the contributor's trade the conditions for claiming IBA are satisfied provided that the trade etc. is a qualifying trade for IBA. 
    
    If the contribution is made for the purposes of a tenant's trade, IBA will be due provided that the tenant's trade is a qualifying trade for IBA. 
    
    If the contribution was made for the purposes of a tenant's trade and the contributor's interest in the land occupied by the tenant is transferred the person to whom it is transferred can claim IBAs after the transfer. 
    
    If the contribution was made for the purposes of the contributor's trade and that trade is transferred WDAs after the transfer are made to the person to whom the trade is transferred. 
    
    If part of the trade is transferred make WDAs to the transferee to the extent that they are attributable to the part transferred. 
    
    The rules about recalculating IBA WDAs when the relevant interest is transferred [CA34600](https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca34600) do not apply to contributions.