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HMRC internal manual

Capital Allowances Manual

IBA: enterprise zones: purchase of used buildings within two years of first use

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. This phasing out does not apply to EZ WDAs. They continue in full until the cut-off date. There are no IBA writing down allowances for the financial year beginning on 1 April 2011 and subsequent years.

CAA01/S301

Used buildings:

  • do not qualify for initial allowance, and
  • qualify for WDA based on the residue of qualifying expenditure after sale spread over the rest of the 25 year writing down period.

 

unless they are bought within 2 years of first use. A person who is the first one to buy a used building in an enterprise zone within 2 years of first use is treated as buying an unused building. This means that the allowances are based on a new amount of qualifying expenditure and that an initial allowance of 100% or WDA at the 25% rate is available.

Where a person buys a used building in an enterprise zone within 2 years of first use calculate a balancing adjustment for the seller in the usual way.

A taxpayer who buys any other type of used building in an enterprise zone cannot claim the 25% rate of WDA. WDA is based on the residue of qualifying expenditure after sale in the normal way CA34600.