Section 242: Restriction on B’s qualifying expenditure: general
861.This section is based on section 76(2), (2A) and (2B) and parts of sections 75(1), (2) and (3) and 76(4) of CAA 1990. It extends and replaces the rules in section 218 to deal with cases that would fall within that section if the expenditure also involves a VAT element. It ensures that the VAT is taken into account when restricting the allowances.
862.Subsection (1) applies the provisions of this section in place of those in section 218 when VAT is involved.
863.Subsection (2) sets the limit to the available qualifying expenditure by reference to the amounts D and E.
864.Subsection (3) defines “E” to include the additional VAT. This is subject to the rule for the case defined in subsection (6).
865.Subsection (4) defines “D” if the seller is required to bring a disposal value into account: D is that disposal value.
866.Subsection (5) defines “D” if the seller is not required to bring a disposal value into account. That may be because the seller is not within the UK tax net. In these circumstances D is the smallest of the three amounts specified. For those amounts other than the market value, the amount is adjusted to take account of the related VAT element.
867.Subsection (6) defines “E” if D is determined under subsection (5), as market value inclusive of VAT. E includes that VAT.
