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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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IBA: other rules about buildings: temporary disuse

Budget 2007 announced a business tax reform package including the gradual withdrawal of IBAs and ABAs over four years. Legislation was introduced in FA08 to give effect to those changes. The phased withdrawal of IBA writing down allowances had effect for chargeable periods ending on or after 1 April 2008 for businesses within the charge to CT and 6 April 2008 for businesses within the charge to IT. There are no IBA writing down allowances for the financial year beginning on 1 April 2011 and subsequent years.CAA01/S285

A building which was an industrial building immediately before it becomes temporarily disused is treated as an industrial building while it is temporarily disused. This means that IBA continues. There is no time limit on the length of a period of temporary disuse unless the building was a qualifying hotel. A qualifying hotel which becomes temporarily disused is treated as a qualifying hotel for two years after the end of the chargeable period in which the temporary disuse begins but for no longer.

You should accept that a building is temporarily disused if it is capable of being used for something. It does not need to be capable of being used for a qualifying trade. Any potential use is good enough. If it is not capable of further use for any purpose it is not temporarily disused.

The taxpayer must genuinely regard the building as temporarily out of use. This will not be the case where the taxpayer decides, for example, to let the building go to rack and ruin because he has redevelopment plans in mind. Then the building will cease altogether to be used and there will be a balancing event CA35050.

Disuse of a building is temporary if the disuse occurs between two periods of use. It is implicit that the benefit of treating the building as being in temporary disuse is only available provided that the building is, in fact, used again. So a building will not be temporarily disused where, say, it is left empty for three years and then demolished.

For example, a company that manufactures typewriters may decide to change to the manufacture of word processors. As a result, it leaves its factory standing empty for a few months after the manufacture of typewriters stops and before the manufacture of word processors begins. Those few months are a period of temporary disuse. Alternatively, the company may leave the factory standing empty after the manufacture of typewriters ends so that the building can be demolished. That period of disuse is not a period of temporary disuse.

A period of disuse can be protected by the Section 285 legislation if the next period of use is by the next owner of the relevant interest.

A building may at first appear to be genuinely temporarily disused and the taxpayer claims the benefit of Section 285 in good faith. Later, perhaps because of a recession, it becomes clear the disuse will not be temporary. In such a case the earlier application of Section 285 should not be opposed. Any allowances given during the period of apparent temporary disuse will be dealt with in the balancing adjustment required when there is a balancing event; for example, when the site is sold for redevelopment or it is clear that the building has ceased altogether to be used. The period of disuse will be treated as non-qualifying use and the balancing allowance will be reduced or the balancing charge will be increased accordingly.