Section 240: Additional VAT liability
856.This section is based on section 37(4A) of CAA 1990. It applies if an additional VAT liability is incurred in respect of plant or machinery on which a short-life asset election has been made under section 85.
857.If a balancing allowance has been made following a disposal event in respect of a short-life asset pool, this section provides that a subsequent additional VAT liability may give rise to a further balancing allowance.
858.Normally, it is not possible for an additional VAT liability to be qualifying expenditure if it is incurred after the disposal of the plant or machinery. However, this section provides an exception if:
the plant or machinery was subject to an election under section 85;
a balancing allowance has arisen in the short-life asset pool;
an additional VAT liability is incurred after the end of the chargeable period in which the balancing allowance was incurred; and
the additional VAT liability was not taken into account when calculating the balancing allowance.
