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Capital Allowances Act 2001

Section 517: Dwelling-house not a qualifying dwelling-house throughout

1815.This section is based on section 88 of CAA 1990. It sets out the calculation of a balancing adjustment if the dwelling-house was not a qualifying dwelling-house for some of the time that the person held the relevant interest.

1816.The calculation starts by comparing the proceeds with the person’s “starting expenditure”. The “starting expenditure” is defined in section 521.

1817.If the proceeds exceed or equal the starting expenditure, all allowances given to the person are recaptured by a balancing charge.

1818.If the proceeds are less than the starting expenditure then the person has broadly suffered a “loss” on the dwelling-house. This “loss” is pro-rated to the part of the person’s period of ownership during which the dwelling-house was a qualifying dwelling-house. There is a formula for this in section 522 and the result is called the adjusted net cost.

1819.Then there is a balancing allowance or balancing charge, as the case may be, based on whether the adjusted net cost is more (allowance) or less (charge) than the allowances given to the person. The adjustment is the difference between the proceeds and the adjusted net cost.

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