Capital Allowances Act 1990

87 Balancing allowances and charges and withdrawal of initial allowances in certain cases

(1) Where any capital expenditure has been incurred on the construction of a building which is to be or include a qualifying dwelling-house and any of the following events occur while a dwelling-house comprised in that building is a qualifying dwelling-house, that is to say—

(a) the relevant interest in the dwelling-house is sold, or

(b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled to it acquiring the interest which is reversionary on it, or

(c) the dwelling-house is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,

then, subject to subsection (2) below, for the chargeable period related to that event an allowance or charge (a “balancing allowance” or a “balancing charge”) shall, in the circumstances mentioned below, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs.

(2) No balancing allowance or balancing charge shall be made by reason of any event occurring more that 25 years after the dwelling-house was first used.

(3) Subject to section 88, where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount of it shall be the amount of that residue, or as the case may be, of the excess of that residue over those moneys.

(4) Subject to section 88, if the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an equal amount to the excess or, where the residue is nil, to those moneys.

(5) For the purposes of this Part, any transfer of the relevant interest in a dwelling-house, otherwise than by way of sale, shall be treated as a sale of that interest for a price other than that which it would have fetched if sold on the open market; and if sections 157 and 158 would not, apart from this subsection, have effect in relation to a transfer treated as a sale by virtue of this subsection, those sections shall have effect in relation to it as if it were a sale falling within section 157(1)(a).

(6) Notwithstanding anything in subsections (1) to (5) above, or in section 88, 157 or 158, in no case shall the amount on which a balancing charge is made on any person in respect of any expenditure on the construction of a dwelling-house comprised in a building exceed the amount of the initial allowance, if any, made to him in respect of the expenditure appropriate to that dwelling-house together with the amount of any writing-down allowances made to him in respect of that expenditure for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis periods end on or before that date.

(7) Notwithstanding the repeal by this Act of sub-paragraph (3) of paragraph 1 of Schedule 12 to the [1982 c. 39.] Finance Act 1982, where an initial allowance has been granted in respect of any expenditure relating to a dwelling-house which, when it comes to be used, is not a qualifying dwelling-house, all such assessments shall be made to secure that effect is given to the prohibition in that sub-paragraph on the making of an initial allowance in such a case.

(8) In this section “initial allowance” means an initial allowance granted under paragraph 1 of Schedule 12 to the [1982 c. 39.] Finance Act 1982.