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HMRC internal manual

Capital Allowances Manual

IBA: other rules about buildings: territorial limitation

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.


A building outside the United Kingdom is not an industrial building unless the profit of the trade for which it is used are assessable under the rules in Part 2 ITTOIA 2005 that apply in calculating trade profits for income tax or Part 3 Chapter 2 CTA 2009 (formerly Case 1 Schedule D) for corporation tax

Example Verlaine, a UK resident, builds a factory in France and leases it to Rimbaud. Verlaine can claim IBA on the factory only if the profits of the trade for which Rimbaud uses the factory are assessable as trading income. If Rimbaud’s profits are assessable only in France there is no IBA due.