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Finance (No. 2) Bill


Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

129

 

360D    

Meaning of “qualifying business premises”

(1)   

In this Part “qualifying business premises” means any premises in

respect of which the following requirements are met—

(a)   

the premises must be a qualifying building,

(b)   

the premises must be used, or available and suitable for

5

letting for use,—

(i)   

for the purposes of a trade, profession or vocation, or

(ii)   

as an office or offices (whether or not for the purposes

of a trade, profession or vocation),

(c)   

the premises must not be used, or available for use as, or as

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part of, a dwelling.

(2)   

In this section “premises” means any building or structure or part of

a building or structure.

(3)   

For the purposes of this Part, if premises are qualifying business

premises immediately before a period when they are temporarily

15

unsuitable for use for the purposes mentioned in subsection (1)(b),

they are to be treated as being qualifying business premises during

that period.

(4)   

The Treasury may by regulations make further provision as to the

circumstances in which premises are, or are not, qualifying business

20

premises.

CHAPTER 4

THE RELEVANT INTEREST IN THE QUALIFYING BUILDING

360E    

General rule as to what is the relevant interest

(1)   

The relevant interest in a qualifying building in relation to any

25

qualifying expenditure is the interest in the qualifying building to

which the person who incurred the qualifying expenditure was

entitled when it was incurred.

(2)   

Subsection (1) is subject to the following provisions of this Chapter

and to section 360Z3 (provisions applying on termination of lease).

30

(3)   

If—

(a)   

the person who incurred the qualifying expenditure was

entitled to more than one interest in the qualifying building

when the expenditure was incurred, and

(b)   

one of those interests was reversionary on all the others,

35

   

the reversionary interest is the relevant interest in the qualifying

building.

(4)   

An interest does not cease to be the relevant interest merely because

of the creation of a lease or other interest to which that interest is

subject.

40

(5)   

If—

(a)   

the relevant interest is a leasehold interest, and

(b)   

that interest is extinguished on the person entitled to it

acquiring the interest which is reversionary on it,

 

 

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

130

 

   

the interest into which the leasehold interest merges becomes the

relevant interest when the leasehold interest is extinguished.

360F    

Interest acquired on completion of conversion

   

For the purposes of determining the relevant interest in a qualifying

building, a person who—

5

(a)   

incurs expenditure on the conversion of a qualifying building

into qualifying business premises, and

(b)   

is entitled to an interest in the qualifying building on or as a

result of the completion of the conversion,

   

is treated as having had that interest when the expenditure was

10

incurred.

CHAPTER 5

INITIAL ALLOWANCES

360G    

Initial allowances

(1)   

A person who has incurred qualifying expenditure in respect of any

15

qualifying building is entitled to an initial allowance in respect of the

expenditure.

(2)   

The amount of the initial allowance is 100% of the qualifying

expenditure.

(3)   

A person claiming an initial allowance under this section may

20

require the allowance to be reduced to a specified amount.

(4)   

The initial allowance is made for the chargeable period in which the

qualifying expenditure is incurred.

360H    

Premises not qualifying business premises or relevant interest sold

before premises first used or let

25

(1)   

No initial allowance is to be made under section 360G if, at the

relevant time, the qualifying building does not constitute qualifying

business premises.

(2)   

An initial allowance which has been made in respect of a qualifying

building which is to be qualifying business premises is to be

30

withdrawn if—

(a)   

the qualifying building does not constitute qualifying

business premises at the relevant time, or

(b)   

the person to whom the allowance was made has sold the

relevant interest in the qualifying building before the

35

relevant time.

(3)   

All such assessments and adjustments of assessments are to be made

as are necessary to give effect to this section.

(4)   

In this section “the relevant time” means the time when the premises

are first used by the person with the relevant interest or, if they are

40

not so used, the time when they are first suitable for letting for either

of the purposes mentioned in section 360D(1)(b).

 

 

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

131

 

CHAPTER 6

WRITING-DOWN ALLOWANCES

360I    

Entitlement to writing-down allowances

(1)   

A person is entitled to a writing-down allowance for a chargeable

period if he has incurred qualifying expenditure in respect of a

5

qualifying building and, at the end of the chargeable period—

(a)   

the person is entitled to the relevant interest in the qualifying

building,

(b)   

the person has not granted a long lease of the qualifying

building out of the relevant interest in consideration of the

10

payment of a capital sum, and

(c)   

the qualifying building constitutes qualifying business

premises.

(2)   

In subsection (1)(b) “long lease” means a lease the duration of which

exceeds 50 years.

15

(3)   

Whether the duration of a lease exceeds 50 years is to be

determined—

(a)   

in accordance with section 303 of ITTOIA 2005, and

(b)   

without regard to section 360Z3(3) of this Act (new lease

granted as a result of the exercise of an option treated as

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continuation of old lease).

(4)   

A person claiming a writing-down allowance may require the

allowance to be reduced to a specified amount.

360J    

Amount of allowance

(1)   

The writing-down allowance for a chargeable period is 25% of the

25

qualifying expenditure.

(2)   

The allowance is proportionately increased or reduced if the

chargeable period is more or less than a year.

(3)   

The amount of the writing-down allowance for a chargeable period

is limited to the residue of qualifying expenditure.

30

(4)   

For this purpose the residue is ascertained immediately before

writing off the writing-down allowance at the end of the chargeable

period.

360K    

Meaning of “the residue of qualifying expenditure”

The residue of qualifying expenditure is the qualifying expenditure

35

that has not yet been written off in accordance with Chapter 9.

CHAPTER 7

GRANTS IN RESPECT OF QUALIFYING EXPENDITURE

360L    

Grants affecting entitlement to allowances

(1)   

No initial allowance or writing-down allowance under this Part is to

40

be made in respect of expenditure to the extent that it is taken into

 

 

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

132

 

account for the purposes of a relevant grant or relevant payment

made towards that expenditure.

(2)   

A grant or payment is relevant if it is—

(a)   

a notified State aid other than an allowance under this Part, or

(b)   

a grant or subsidy, other than a notified State aid, which the

5

Treasury by order declares to be relevant for the purposes of

the withholding of initial allowances or writing-down

allowances.

(3)   

For the purposes of subsection (2), “notified State aid” means a State

aid notified to and approved by the European Commission.

10

(4)   

If a relevant grant or relevant payment towards the expenditure is

made after the making of an initial allowance or a writing-down

allowance, the allowance is to be withdrawn to that extent.

(5)   

If the amount of the relevant grant or relevant payment is repaid by

the grantee to the grantor, in whole or in part, the grant or payment

15

is treated, to that extent, as never having been made.

(6)   

All such assessments and adjustments of assessments are to be made

as are necessary to give effect to subsection (4) or (5).

(7)   

Any such assessment or adjustment is not out of time if it is made

within 3 years of the end of the chargeable period in which the grant,

20

payment or adjustment was made.

CHAPTER 8

BALANCING ADJUSTMENTS

360M    

When balancing adjustments are made

(1)   

A balancing adjustment is made if—

25

(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

30

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 7 years after the time when the premises were first used, or

35

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.

360N    

Balancing events

40

(1)   

The following are balancing events for the purposes of this Part—

(a)   

the relevant interest in the qualifying building is sold;

 

 

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

133

 

(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

5

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).

10

(2)   

Section 360I(2) and (3) (meaning of “long lease”) applies for the

purposes of subsection (1)(b).

360O    

Proceeds from balancing events

(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

15

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.

 

20

 

2 The grant of a long lease out of

If the capital sum paid in

 
 

the relevant interest.

consideration of the grant is less

 
  

than the commercial premium, the

 
  

commercial premium.

 
  

In any other case, the capital sum

 

25

  

paid in consideration of the grant.

 
 

3 The coming to an end of a lease,

The market value of the relevant

 
 

where a person entitled to the

interest in the qualifying building

 
 

lease and a person entitled to any

at the time of the event.

 
 

superior interest are connected

  

30

 

persons.

  
 

4 The death of the person who

The residue of qualifying

 
 

incurred the qualifying

expenditure immediately before

 
 

expenditure.

the death.

 
 

5 The demolition or destruction of

The net amount received for the

 

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the qualifying building.

remains of the qualifying

 
  

building, together with—

 
  

(a)   

any insurance money

 
  

received in respect of the

 
  

demolition or destruction,

 

40

  

and

 
  

(b)   

any other compensation of

 
  

any description so

 
  

received, so far as it

 
  

consists of capital sums.

 

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Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

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1 Balancing Event

2 Proceeds from event

 
 

6 The qualifying building ceases to

The market value of the relevant

 
 

be qualifying business premises.

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

5

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.

360P    

Calculation of balancing adjustments

10

(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.

15

(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

20

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

25

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

30

the date of the balancing event giving rise to the balancing

adjustment.

CHAPTER 9

WRITING OFF QUALIFYING EXPENDITURE

360Q    

Introduction

35

For the purposes of this Part qualifying expenditure is written off to

the extent and at the times specified in this Chapter.

360R    

Writing off initial allowances and writing-down allowances

(1)   

If an initial allowance is made in respect of the qualifying

expenditure, the amount of the allowance is written off at the time

40

when the qualifying business premises are first used, or suitable for

 

 

Finance (No. 2) Bill
Schedule 6 — Capital allowances: renovation of business premises in disadvantaged areas
Part 1 — New Part 3A of the Capital Allowances Act 2001

135

 

letting for use, for either of the purposes mentioned in section

360D(1)(b).

(2)   

If a writing-down allowance is made in respect of the qualifying

expenditure, the amount of the allowance is written off at the end of

the chargeable period for which the allowance is made.

5

(3)   

If a balancing event occurs at the end of the chargeable period

referred to in subsection (2), the amount written off under that

subsection is to be taken into account in calculating the residue of

qualifying expenditure immediately before the event to determine

what balancing adjustment (if any) is to be made.

10

360S    

Treatment of demolition costs

(1)   

This section applies if—

(a)   

a qualifying building is demolished, and

(b)   

the person who incurred the qualifying expenditure incurs

the cost of the demolition.

15

(2)   

The net cost of the demolition is added to the residue of qualifying

expenditure immediately before the demolition.

(3)   

“The net cost of the demolition” means the amount, if any, by which

the cost of the demolition exceeds any money received for the

remains of the qualifying building.

20

(4)   

If this section applies, neither the cost of the demolition nor the net

cost of the demolition is treated for the purposes of any Part of this

Act as expenditure on any other property replacing the qualifying

building demolished.

CHAPTER 10

25

ADDITIONAL VAT LIABILITIES AND REBATES

360T    

Introduction

For the purposes of this Chapter—

(a)   

“additional VAT liability” and “additional VAT rebate” have

the meanings given by section 547,

30

(b)   

the time when—

(i)   

a person incurs an additional VAT liability, or

(ii)   

an additional VAT rebate is made to a person,

   

is given by section 548, and

(c)   

the chargeable period in which, and the time when, an

35

additional VAT liability or an additional VAT rebate accrues

are given by section 549.

360U    

Additional VAT liabilities and initial allowances

(1)   

This section applies if—

(a)   

a person was entitled to an initial allowance under this Part

40

in respect of qualifying expenditure on a qualifying building,

(b)   

that person incurs an additional VAT liability in respect of

that expenditure, and

 

 

 
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