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Capital Allowances Act 2001

Section 235: Additional VAT liability treated as qualifying expenditure

833.This section is based on section 24(1A) of CAA 1990. It provides that an additional VAT liability may be treated as further qualifying expenditure.Subsection (1) provides the conditions for the section to apply. These are that:

  • a person has incurred qualifying expenditure (this is known as “the original expenditure);

  • an additional VAT liability is incurred in respect of the original expenditure; and

  • the plant or machinery is (still) provided for the purposes of the qualifying activity when the additional VAT liability is incurred.

834.Subsection (2)(a) ensures that the additional VAT liability is then treated as further qualifying expenditure in respect of the plant or machinery. This is necessary to ensure that the cap on disposal values in section 62 correctly takes into account the additional VAT liability incurred.

835.Subsection (2)(b) allows this further qualifying expenditure to be taken into account in the chargeable period in which the additional VAT liability accrues.

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