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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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IBA: writing down allowances: conditions

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/S309

Where qualifying expenditure CA33500 has been incurred on a building a person is entitled to a writing down allowance (WDA) for a chargeable period if both of the following conditions are met at the end of the chargeable period -

  • the person holds the relevant interest CA33000 in relation to that qualifying expenditure; and
  • the building is in qualifying use CA32000.

 

You cannot make a balancing adjustment more than 25 years after the building was first used CA35050. There is no time restriction like that for WDA. A WDA may be made for a chargeable period more than 25 years after the building was first used provided that there is still qualifying expenditure to write off and the building is in qualifying use.

Example Bob constructs an industrial building for £1 million in 1980 and brings it into use immediately. The annual WDA is £25,000. He does not claim any WDA in 1990, 1991 or 1995. When he claims a WDA of £25,000 for 2006 he may have it. He may also claim a WDA of £25,000 for two subsequent years until the expenditure is fully relieved, but only if he retains the relevant interest in the property.

A person who buys a used industrial building may incur revenue rather than capital expenditure. For example, the building may be bought by a property developer as trading stock. If the building is in qualifying use after the sale the person may claim IBA. The reason is that the WDA of a person who buys a used building is based on the residue of qualifying expenditure after sale CA34600 and this is the same whether the buyer’s expenditure is capital or revenue.