Chapter 10: Additional VAT liabilities and rebates
Overview
1162.This Chapter deals with the interaction of the industrial buildings allowances and the VAT capital items legislation.
1163.Section 345 applies for this Chapter definitions in Chapter 2 of Part 12.
1164.Sections 346 to 348 deal with additional VAT liabilities. Broadly they:
give entitlement to initial allowances if the person was entitled to an initial allowance for qualifying enterprise zone expenditure and the additional VAT is incurred no more than 10 years after the site was included in an enterprise zone; or
give rise to qualifying expenditure increasing the residue of qualifying expenditure and so increase allowances.
1165.Sections 349 to 351 deal with additional VAT rebates. The rebate:
reduces the residue of qualifying expenditure (and so reduces allowances); and
may give rise to a balancing charge.
Section 345: Introduction
1166.This section applies definitions in Chapter 2 of Part 12 for this Chapter.
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.
Section 347: Additional VAT liabilities and writing-down allowances
1172.This section is based on section 3(2A) and (2B) and part of section 159A(3) of CAA 1990. It provides the general rule for additional VAT liabilities.
1173.In order to ensure that the additional VAT liability (and increase in the residue of qualifying expenditure) gives rise to increased writing-down allowances, subsection (3) provides that the incurring of an additional VAT liability is a relevant event for the purposes of section 311.
