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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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IBA: relevant interest: creation of subordinate interest

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.


An interest that is the relevant interest stays the relevant interest if a subordinate interest is granted out of it unless a long lease is granted out of the relevant interest and an election is made to treat that grant of a long lease as the sale of the relevant interest CA33100, (Woods v R M Mallen Engineering Ltd. 45TC619). In the Woods v Mallen case, a sublease was created out of a 99-year leasehold interest that was the relevant interest in a building. The sublease expired three days before the leasehold interest. A claim that the sublease was the relevant interest was refused.