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Capital Allowances Act 2001

Section 346: Additional VAT liabilities and initial allowances

1167.This section is based on section 1(1A) and parts of sections 1(5) and 159A(3) of CAA 1990. It provides for initial allowances to be given in respect of additional VAT liabilities incurred in respect of the qualifying expenditure.

1168.Subsection (1)(a) provides the main condition – that the original expenditure entitled the person incurring it to an initial allowance in respect of qualifying enterprise zone expenditure.

1169.Subsection (1)(b) to (d) provides the other conditions that need to be met for an initial allowance to be given.

1170.Subsection (6) makes it clear that the person entitled to the initial allowance in respect of the original expenditure need not be the person incurring the additional VAT liability.

1171.Initial allowances may also be due in respect of additional VAT liabilities arising if the original capital expenditure was incurred in the year ended 31 October 1993. This rule is now of limited application and is dealt with in paragraphs 75 to 77 of Schedule 3.

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