Part 3A

Business Premises Renovation Allowances
Chapter 8

BALANCING ADJUSTMENTS

When balancing adjustments are made
360M
1
A balancing adjustment is made if—
a
qualifying expenditure has been incurred in respect of a qualifying building, and
b
a balancing event occurs.
2
A balancing adjustment is either a balancing allowance or a balancing charge and is made for the chargeable period in which the balancing event occurs.
3
A balancing allowance or balancing charge is made to or on the person who incurred the qualifying expenditure.
4
No balancing adjustment is made if the balancing event occurs more than
5
years after the time when the premises were first used, or suitable for letting, for either of the purposes mentioned in section 360D(1)(b).
5
If more than one balancing event within section 360N occurs, a balancing adjustment is made only on the first of them.

Balancing events
360N
1
The following are balancing events for the purposes of this Part—
a
the relevant interest in the qualifying building is sold;
b
a long lease of the qualifying building is granted out of the relevant interest in consideration of the payment of a capital sum;
c
if the relevant interest is a lease, the lease ends otherwise than on the person entitled to it acquiring the interest reversionary on it;
d
the person who incurred the qualifying expenditure dies;
e
the qualifying building is demolished or destroyed;
f
the qualifying building ceases to be qualifying business premises (without being demolished or destroyed).
2
Section 360I(2) and (3) (meaning of “long lease”) applies for the purposes of subsection (1)(b).

Proceeds from balancing events
360O
1
References in this Part to the proceeds from a balancing event are to the amounts received or receivable in connection with the event, as shown in the Table—

TABLE: BALANCING EVENTS AND PROCEEDS
1 Balancing Event | 2 Proceeds from event
1 The sale of the relevant interest. | The net proceeds of the sale.
2 The grant of a long lease out of the relevant interest. | If the capital sum paid in consideration of the grant is less than the commercial premium, the commercial premium. In any other case, the capital sum paid in consideration of the grant.
3 The coming to an end of a lease, where a person entitled to the lease and a person entitled to any superior interest are connected persons. | The market value of the relevant interest in the qualifying building at the time of the event.
4 The death of the person who incurred the qualifying expenditure. | The residue of qualifying expenditure immediately before the death.
5 The demolition or destruction of the qualifying building. | The net amount received for the remains of the qualifying building, together with 1. any insurance money received in respect of the demolition or destruction, and 2. any other compensation of any description so received, so far as it consists of capital sums.
6 The qualifying building ceases to be qualifying business premises. | The market value of the relevant interest in the qualifying building at the time of the event.
2
The amounts referred to in column 2 of the Table are those received or receivable by the person who incurred the qualifying expenditure.
3
In Item 2 of the Table “
the commercial premium
” means the premium that would have been given if the transaction had been at arm's length.

Calculation of balancing adjustments
360P
1
A balancing allowance is made if—
a
there are no proceeds from the balancing event, or
b
the proceeds from the balancing event are less than the residue of qualifying expenditure immediately before the event.
2
The amount of the balancing allowance is the amount of—
a
the residue (if there are no proceeds);
b
the difference (if the proceeds are less than the residue).
3
A balancing charge is made if the proceeds from the balancing event are more than the residue, if any, of qualifying expenditure immediately before the event.
4
The amount of the balancing charge is the amount of—
a
the difference, or
b
the proceeds (if the residue is nil).
5
The amount of a balancing charge made on a person must not exceed the total amount of—
a
any initial allowances made to the person in respect of the expenditure, and
b
any writing-down allowances made to the person in respect of the expenditure for chargeable periods ending on or before the date of the balancing event giving rise to the balancing adjustment.
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Pt. 3A inserted (11.4.2007 with effect in accordance with s. 92 of the amending Act) by Finance Act 2005 (c. 7), Sch. 6 para. 1; S.I. 2007/949, art. 2
S. 360M(4) substituted (with effect in accordance with s. 66(10) of the amending Act) by Finance Act 2014 (c. 26), s. 66(9)