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Capital Allowances Act 2001

Chapter 3: Qualifying expenditure

1270.This Chapter identifies qualifying expenditure for the purposes of Part 4.

1271.Section 369 gives the general rule about capital expenditure incurred on the construction of an agricultural building which is not sold before it was first used. Broadly, the capital expenditure is qualifying expenditure. It also provides special rules for farmhouses and for buildings only partly used for the purposes of husbandry.

1272.Section 370 deals with expenditure on buildings if the relevant interest is sold before first use of the building. Broadly, the lesser of the construction expenditure and the price paid is qualifying expenditure.

1273.Section 371 apportions expenditure if a person has different relevant interests in different parts of the related agricultural land.

Section 369: Capital expenditure on construction of agricultural building

1274.This section is based on parts of sections 123 and 124(1) of CAA 1990. It gives the general rule for what is qualifying expenditure for the purposes of agricultural buildings allowances. It also:

  • restricts the expenditure on farm houses which can be qualifying expenditure; and

  • caters for expenditure on buildings which are only partly for use on the related agricultural land.

1275.There is a minor change. The section provides for a “just and reasonable apportionment”. CAA 1990 provides for a “just apportionment”. See Change 40 in Annex 1.

Section 370: Purchase of relevant interest before first use of agricultural building

1276.This section is based mainly on parts of sections 123 and 127 of CAA 1990. It deals with expenditure which would have been qualifying expenditure but for a sale of the relevant interest before the building was first used. The qualifying expenditure is then broadly the lesser of:

  • the capital expenditure which would have been the qualifying expenditure for the person who incurred it; and

  • the expenditure paid by the buyer in respect of the building.

1277.There is a minor change in subsection (1). It gives the buyer qualifying expenditure only if a capital sum is paid for the relevant interest. CAA 1990 does not require the sum to be capital. See Change 43 in Annex 1.

1278.Subsection (3) provides that:

  • expenditure which is excluded from qualifying expenditure by section 369(3) to (5) is also excluded for the purpose of this section; and

  • a just and reasonable apportionment must be made of the purchase price as between the building and other things (for example land). There is a minor change. It is the use of “just and reasonable apportionment” whereas CAA 1990 uses “just apportionment”. See Change 40 in Annex 1.

Section 371: Different relevant interests in different parts of the related agricultural land

1279.This section caters for a person who incurs qualifying expenditure on the construction of a building but who has different relevant interests in different parts of the related agricultural land. The expenditure is apportioned between the different parts.

1280.There is nothing corresponding to this in CAA 1990. But this Act differs from CAA 1990. It allows in section 361 for expenditure incurred for husbandry on land made up of several relevant interests in the related agricultural land. This provision follows through the consequences of that. See Note 49 in Annex 2.

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