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Capital Allowances Act 2001


1718.The 1952 Royal Commission on the Taxation of Profits and Income recommended that allowances should be available for the capital cost of cutting or tunnelling land.

1719.In response to this recommendation FA 1956 extended allowances for industrial buildings in respect of expenditure on preparing, cutting, tunnelling or levelling land for the purpose of constructing an industrial building or structure, and introduced a new system of allowances for capital expenditure on dredging.

1720.When the legislation relating to capital allowances was consolidated in CAA 1990 the provisions on dredging became Part VI of that Act (sections 134 and 135).

1721.Under FA 1956, allowances for dredging were given at the same rates as allowances for industrial buildings. There was an initial allowance of 10% and an annual writing-down allowance of 2%. The writing-down period was 50 years. Dredging allowances differed from industrial buildings allowance in that there were no balancing charges or balancing allowances. There was an additional allowance, equivalent to a balancing allowance, if the relevant trade was permanently discontinued.

1722.The 2% rate and the 50-year period are still relevant for expenditure incurred before 5 November 1962. The legislation for this is in paragraphs 103 and 105 of Schedule 3 to this Act.

1723.FA 1963 increased the annual rate of writing-down allowances for both industrial buildings and dredging from 2% to 4% for expenditure incurred after 5 November 1962. As part of a wider reform of business taxation, FA 1985 abolished initial allowances, including those for dredging.

1724.Paragraph 105 of Schedule 3 deals with the writing-down period if allowances were made under paragraph 27(2) of Schedule 14 to FA 1965.

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