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HMRC internal manual

Capital Allowances Manual

IBA: Qualifying expenditure: Apportion where purchase price includes assets which do not qualify for IBA

CAA01/S356

You should apportion the total price paid for the freehold of an industrial building to establish the part of the price that is paid for the building because it is only the price paid for the building itself that qualifies for IBA. Anything else included in the price, such as the land on which the building stands, does not. You should always make an apportionment because the freehold will include the land on which the building stands as well as the actual building.

You should also apportion the premium paid for a leasehold interest in an industrial building because the leasehold interest will relate to the land on which the building stands as well as the actual building.

The legislation lets you make a just apportionment in these cases. This was confirmed by the Special Commissioners in the case of *An Enterprise Zone Syndicate v An Inspector of Taxes, SPC89 (1996). *The syndicate bought the freehold interest in a property in an enterprise zone and claimed IBA on the total purchase price including stamp duty and legal fees less a nominal land value. The Special Commissioners found that a just apportionment should be made of the purchase price to exclude the land value.

You should also make a just apportionment where the purchase price of a building includes other assets on which another type of CA is claimed, such as plant or machinery fixtures where PMA has been claimed.