Chapter 6: Writing-down allowances
Overview
1052.This Chapter provides writing-down allowances. It deals with who is entitled to writing-down allowances and how they are calculated. Writing-down allowances are made for qualifying enterprise zone expenditure and other qualifying expenditure.
1053.Section 309 gives entitlement to a writing-down allowance to the person entitled to the relevant interest at the end of the chargeable period provided the building is at that time an industrial building.
1054.Section 310 gives the basic rule for calculating the amount of a writing-down allowance:
4% a year of qualifying expenditure; but
25% a year of qualifying enterprise zone expenditure.
1055.Section 311 provides the writing-down allowance due to the purchaser of the relevant interest in an industrial building. The allowance is calculated to write off the residue of the qualifying expenditure after the sale over the remainder of the period of 25 years from the first use of the building. Section 313 defines “the residue of qualifying expenditure”. It is the amount of qualifying expenditure not yet written off (see Chapter 8).
1056.Section 312 limits the amount of writing-down allowance which can be made for a chargeable period to the residue of expenditure.
Section 309: Entitlement to writing-down allowance
1057.This section is based on section 3(1) of CAA 1990. It sets out the conditions for a writing-down allowance.
1058.There is a minor change. Subsection (2) permits a person who is entitled to a writing-down allowance to claim any amount which is less than the amount due. See Change 38 in Annex 1.
Section 310: Basic rule for calculating amount of allowance
1059.This section is based on section 3(2) and section 6(2) of CAA 1990. It provides the basic rule for the amount of a writing-down allowance.
Section 311: Calculation of amount after sale of relevant interest
1060.This section is based on parts of section 3(2B) and (3) of CAA 1990. It provides the amount of a writing-down allowance after the sale of the relevant interest in a building which is or has been an industrial building. It can also apply after an additional VAT liability or rebate.
1061.The starting point for the calculation is “the residue of qualifying expenditure”. This is defined in section 313 by reference to Chapter 8. The writing-down allowance is then calculated as a fraction of the residue of qualifying expenditure. That fraction is the length of a chargeable period divided by the balance, after the date of the relevant event, of the 25-year period which began when the building was first used. The effect of this is to write off the residue over the remainder of the 25-year period.
Section 312: Allowance limited to residue of qualifying expenditure
1062.This section is based on section 3(4) of CAA 1990. It caps the amount of writing-down allowance for a chargeable period which may be given. This makes sure that allowances do not exceed the qualifying expenditure.
Section 313: Meaning of “the residue of qualifying expenditure”
1063.This section is based on part of section 8(1) of CAA 1990. It defines “the residue of qualifying expenditure” as the amount of qualifying expenditure which has not been written off in accordance with Chapter 8.
