Capital Allowances Act 2001

Capital Allowances Act 2001

2001 CHAPTER 2

Commentary on Sections

Glossary

Part 3: Industrial buildings allowances

Chapter 10: Additional VAT liabilities and rebates

Section 349 and 350: Additional VAT rebates

1177. These sections are based on parts of sections 3, 4 and 159A of CAA 1990. They deal with additional VAT rebates received in respect of qualifying expenditure.

1178. Section 349 applies when the additional VAT rebate received is less than the residue of qualifying expenditure immediately before the rebate accrues. In such cases, subsection (2) provides that writing-down allowances are revised accordingly. Section 351 provides that the residue is first reduced by the amount of the rebate.

1179. Section 350 applies in all cases when an additional VAT rebate is made. However, it is only relevant if the additional VAT rebate exceeds the residue of qualifying expenditure. Subsection (1) provides that the making of the additional VAT rebate is a balancing event. Under section 314, this can give rise to balancing allowances and balancing charges. However, subsection (2) provides that no balancing allowance can arise as a result of an additional VAT rebate.

1180. Subsection (3) provides that a balancing charge will only arise if the additional VAT rebate exceeds the residue of qualifying expenditure. Subsection (4) ensures that the balancing charge is equal to the difference.

1181. Subsection (5) deals with starting expenditure. If and only if:

• a balancing charge is made under this section; and

• the person to whom it is made is the person who incurred the qualifying expenditure,

then the starting expenditure is reduced by the amount of the balancing charge.