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HMRC internal manual

Capital Allowances Manual

IBA: enterprise zones: realisation of capital value: conditions for legislation to apply

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.

All of the following conditions must be satisfied for the realisation of capital value legislation to apply:

  1. the qualifying expenditure must have qualified for enterprise zone allowances
  2. capital value is paid which is attributable to a subordinate interest to which the relevant interest is or will be subject
  3. the payment is made not more than 7 years after the making of the agreement under which the qualifying expenditure is incurred


If the agreement for the qualifying expenditure was conditional the time limit in (c) above is 7 years from the time that the agreement became unconditional.

The legislation applies to payments of capital value made after the 7-year time limit has expired where those payments are made under an agreement made before expiry of the 7-year time limit.

It also applies to payments made after expiry of the 7-year time limit under a conditional agreement to pay capital value made before expiry of the 7-year time limit which becomes unconditional before that date.

In some cases the 7-year time limit is abolished altogether CA37760.