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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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IBA: relevant interest: types of interest that may be the relevant 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.

The relevant interest is usually a freehold or a leasehold interest but it is possible for other interests to be the relevant interest. For example, the capital allowance legislation treats an agreement for a lease as a lease. This means that an agreement for a lease can be the relevant interest.

A tenancy at will is a lease and so it can be the relevant interest. If the relevant interest is a tenancy at will you must remember that a tenancy at will cannot be surrendered and so the legislation about the surrender of a lease does not apply to a tenancy at will. Again, a lease cannot be created out of a tenancy at will and so the legislation about the creation of a subordinate interest does not apply to it.

An equitable interest can also be the relevant interest.

If the relevant interest is the freehold interest and a lease is granted which gives the tenant the right to buy the relevant interest the relevant interest remains with the freeholder until the purchase option is exercised.

A property dealer may buy an industrial building as part of its trading activities. If it does, it acquires the relevant interest in the building and can claim WDA provided that the building continues to be in use as an industrial building.