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In force since 2026-05-01, as the publisher states.
Copy read on 2026-11-08. The page it was read from
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.
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(1) The amount of the writing-down allowance for a chargeable period is limited to the residue of qualifying expenditure. (2) For this purpose the residue is ascertained immediately before writing off the writing-down allowance at the end of the chargeable period.
Propose a changeThe residue of qualifying expenditure is the qualifying expenditure that has not yet been written off in accordance with Chapter 8.
Propose a change(1) This section applies where— (a) there is a sale of the relevant interest in the building which is a balancing event to which section 314 applies, (b) the buyer and seller have different chargeable periods, (c) the control test (within the meaning of section 567) is met, and (d) the purpose, or one of the main purposes, of the sale is the obtaining of a tax advantage by the buyer under this Part. (2) The writing-down allowance to which the buyer is entitled for the chargeable period in which the sale takes place is— DICP×WDA where— DI is the number of days in the chargeable period for which the buyer is entitled to the relevant interest, CP is the number of days in the chargeable period, and WDA is the writing-down allowance to which the buyer would be entitled apart from this section.
Propose a change(1) A balancing adjustment is made if— (a) qualifying expenditure has been incurred on a building, and (b) a balancing event occurs while the building is an industrial building or after it has ceased to be an industrial building. (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 entitled to the relevant interest in the building immediately before the balancing event. (4) No balancing adjustment is made if the balancing event occurs more than 25 years after the building was first used. (5) If more than one balancing event within section 315(1) occurs during a period when the building is not an industrial building, a balancing adjustment is made only on the first of them.
Propose a change(1) The following are balancing events for the purposes of this Part— (a) the relevant interest in the building is sold; (b) if the relevant interest is a lease, the lease ends otherwise than on the person entitled to it acquiring the interest reversionary on it; (c) the building is demolished or destroyed; (d) the building ceases altogether to be used (without being demolished or destroyed); (e) if the relevant interest depends on the duration of a foreign concession, the concession ends. (2) “Foreign concession” means a right or privilege granted by the government of, or any municipality or other authority in, a territory outside the United Kingdom. (3) Other balancing events are provided for by— section 328 (realisation of capital value where site of building is in enterprise zone); section 343 (ending of highway concession); section 350 (additional VAT rebates and balancing adjustments); and a balancing event under this section may also occur as a result of section 317 (hotel not qualifying hotel for 2 years).
Propose a change(1) References in this Part to the proceeds from a balancing event within section 315(1) 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 demolition or destruction of the building. | The net amount received for the remains of the building, together with— (a) any insurance money received in respect of the demolition or destruction, and (b) any other compensation of any description so received, so far as it consists of capital sums. 3. The building ceases altogether to be used. | Any compensation of any description received in respect of the event, so far as it consists of capital sums. 4. A foreign concession ends. | Any compensation payable in respect of the relevant interest. (2) The amounts referred to in column 2 of the Table are those received or receivable by the person whose entitlement to a balancing allowance or liability to a balancing charge is in question.
Propose a change(1) This section applies if— (a) a building ceases to be a qualifying hotel otherwise than on the occurrence of a balancing event which is within section 315(1), and (b) after the building ceases to be a qualifying hotel, a period of 2 years elapses— (i) in which it is not a qualifying hotel, and (ii) without the occurrence of a balancing event. (2) This Part has effect as if— (a) the relevant interest in the building had been sold at the end of the 2 year period, and (b) the net proceeds of the sale were equal to the market value of that interest. (3) Subsection (2) does not affect section 285 (building treated as industrial building during period of temporary disuse). (4) But a building is not to be treated under section 285(b) as continuing to be a qualifying hotel for more than 2 years after the end of the chargeable period in which it falls temporarily out of use. (5) This section does not apply to qualifying enterprise zone expenditure.
Propose a change(1) This section provides for balancing adjustments where the building was— (a) an industrial building, or (b) used for research and development, for the whole of the relevant period of ownership. (2) 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. (3) 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). (4) 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. (5) The amount of the balancing charge is the amount of— (a) the difference, or (b) the proceeds (if the residue is nil).
Propose a change(1) This section provides for balancing adjustments where the building was not— (a) an industrial building, or (b) used for research and development, for a part of the relevant period of ownership. (2) A balancing allowance is made if— (a) there are no proceeds from the balancing event or the proceeds are less than the starting expenditure, and (b) the net allowances made are less than the adjusted net cost of the building. (3) The amount of the balancing allowance is the amount of the difference between the adjusted net cost of the building and the net allowances made. (4) A balancing charge is made if the proceeds from the balancing event are equal to or more than the starting expenditure. (5) The amount of the balancing charge is an amount equal to the net allowances made. (6) A balancing charge is also made if— (a) there are no proceeds from the balancing event or the proceeds are less than the starting expenditure, and (b) the net allowances made are more than the adjusted net cost of the building. (7) The amount of the balancing charge is the amount of the difference between the net allowances made and the adjusted net cost of the building.
Propose a changeThe amount of a balancing charge made on a person must not exceed the amount of the net allowances made.
Propose a changeThe relevant period of ownership is the period beginning— (a) with the day on which the building was first used for any purpose, or (b) if the relevant interest has been sold after that day, with the day following that on which the sale (or the last such sale) occurred, and ending with the day on which the balancing event occurs.
Propose a change(1) This section gives the starting expenditure for the purposes of this Chapter. (2) If the person to or on whom the balancing allowance or balancing charge falls to be made is the person who incurred the qualifying expenditure, that expenditure is the starting expenditure. (3) Otherwise, the starting expenditure is the residue of qualifying expenditure at the beginning of the relevant period of ownership. (4) If section 340 (treatment of demolition costs) applies, the starting expenditure is increased by an amount equal to the net cost of the demolition.
Propose a changeThe amount of the adjusted net cost is— (S-P)xIR where— S is the starting expenditure, P is the amount of any proceeds from the balancing event, I is the number of days in the relevant period of ownership on which the building was an industrial building or used for research and development, and R is the number of days in the whole of the relevant period of ownership.
Propose a changeFor the purposes of this Chapter, the amount of the net allowances made, in relation to any qualifying expenditure, is— (I+WDA+RDA)-B where— I is the amount of any initial allowances made to the person in relation to that qualifying expenditure, WDA is the amount of any writing-down allowances made to the person for chargeable periods ending on or before the date of the balancing event giving rise to the balancing adjustment, RDA is the amount of any allowances under Part 6 (research and development allowances) made to the person for such chargeable periods, and B is the amount of any balancing charges made on the person for such chargeable periods.
Propose a change(1) This section applies if— (a) the relevant interest in a building is sold subject to a subordinate interest, (b) the person entitled to the relevant interest immediately before the sale (“the former owner”) would, apart from this section, be entitled to a balancing allowance under this Chapter as a result of the sale, and (c) condition A or B is met. (2) Condition A is that— (a) the former owner, (b) the person who acquires the relevant interest, and (c) the person to whom the subordinate interest was granted, or any two of them, are connected persons. (3) Condition B is that it appears that the sole or main benefit which might have been expected to accrue to the parties or any of them from the sale or the grant, or transactions including the sale or grant, was the obtaining of an allowance under this Part. (4) For the purpose of deciding what balancing adjustment is to be made in a case to which this section applies, the net proceeds to the former owner of the sale are to be increased— (a) by an amount equal to any premium receivable by him for the grant of the subordinate interest, and (b) if no rent, or no commercial rent, is payable in respect of the subordinate interest, by the amount by which the proceeds would have been greater if a commercial rent had been payable and the relevant interest had been sold in the open market. (5) But the net proceeds of the sale are not to be treated as being greater than the amount which secures that no balancing allowance is made. (6) If the terms on which a subordinate interest is granted are varied before the sale of the relevant interest— (a) any capital consideration for the variation is to be treated for the purposes of this section as a premium for the grant of the interest, and (b) the question whether any, and if so what, rent is payable in respect of the interest is to be determined by reference to the terms in force immediately before the sale. (7) If this section applies in relation to a sale to deny or reduce a balancing allowance, the residue of qualifying expenditure immediately after the sale is nevertheless calculated as if the balancing allowance had been made or not reduced.
Propose a change(1) In section 325— “commercial rent” means such rent as may reasonably be expected to have been required in respect of the subordinate interest (having regard to any premium payable for the grant of the interest) if the transaction had been at arm’s length; “premium” includes any capital consideration, except so much of any sum as corresponds to — an amount brought into account as a receipt in calculating the profits of a property business under sections 217 to 221 of CTA 2009 that is calculated by reference to the sum, or an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum; “subordinate interest” means an interest in or right over the building, whether granted by the former owner or anyone else. (2) In section 325 and this section— “capital consideration” means consideration which consists of a capital sum or would be a capital sum if it had consisted of a money payment, and “rent” includes any consideration which is not capital consideration.
Propose a changeSections 328 to 331 apply only if expenditure on the construction of a building has been incurred— (a) at a time— (i) when the site of the building was wholly or mainly in an enterprise zone, and (ii) which was not more than 10 years after the site was first included in the zone, or (b) under a contract entered into at such a time.
Propose a change(1) There is a balancing event if, while the building is an industrial building or after it has ceased to be one, any capital value is realised. (2) No balancing allowance is to be made because of a balancing event under this section. (3) The amount of capital value realised is to be treated as the proceeds from the balancing event. (4) If a balancing event under this section occurs— (a) section 319 (balancing adjustment where building not an industrial building etc. throughout) has effect as if, immediately after the balancing event, the starting expenditure were reduced by the amount of capital value realised, and (b) if the net proceeds of a sale of the relevant interest fall to be increased under section 325(4) (balancing allowances restricted where sale subject to subordinate interest), those proceeds as so increased are reduced by the amount of any capital value realised before the sale. (5) Capital value is realised if an amount of capital value is paid which is attributable to an interest in land (“the subordinate interest”) to which the relevant interest in the building is or will be subject. (6) The capital value is realised on the making of the payment. (7) The amount of capital value realised is the amount of capital value that is attributable to the subordinate interest under section 329.
Propose a change(1) Capital value is attributable to the subordinate interest if it is paid— (a) in consideration of the grant of the subordinate interest, (b) instead of any rent payable by the person entitled to the subordinate interest, (c) in consideration of the assignment of such rent, or (d) in consideration of— (i) the surrender of the subordinate interest, or (ii) the variation or waiver of any of the terms on which it was granted. (2) If— (a) no premium is given in consideration of the grant of the subordinate interest or any premium so given is less than the commercial premium, and (b) no commercial rent is payable in respect of the subordinate interest, capital value is attributable under subsection (1)(a) as if the commercial premium had been paid on and in consideration of the grant of the subordinate interest. (3) If any value given instead of any rent payable by the person entitled to the subordinate interest is less than the commercial amount, capital value is attributable under subsection (1)(b) as if the commercial amount had been paid. (4) If— (a) any rent payable in respect of the subordinate interest is assigned, but (b) no value is given in consideration of the assignment or any value so given is less than the commercial amount, capital value is attributable under subsection (1)(c) as if the commercial amount had been given on and in consideration of the assignment. (5) If— (a) the subordinate interest is surrendered, or any of the terms on which the subordinate interest was granted are varied or waived, but (b) no value is given in consideration of the surrender, variation or waiver or any value so given is less than the commercial amount, capital value is attributable under subsection (1)(d) as if the commercial amount had been given on and in consideration of the surrender, variation or waiver. (6) Capital value is not attributable to the subordinate interest if it is paid in consideration of the grant of a lease to which an election under section 290 (treating grant of lease exceeding 50 years as sale) applies.
Propose a change(1) Capital value is not realised for the purposes of section 328 if the payment is made more than 7 years after— (a) the agreement under which the qualifying expenditure was incurred was entered into, or (b) if that agreement was conditional, the time when the agreement became unconditional. (2) If an agreement is made to pay in respect of any event an amount of capital value which would be attributable to the subordinate interest, and— (a) the agreement is made, or if conditional becomes unconditional, before the end of the period of 7 years referred to in subsection (1), and (b) the event occurs, or any payment in consideration of the event is made, after the end of that period, the event or payment is treated for the purposes of subsection (1) as occurring or made before the end of the 7 years. (3) Subsection (1) does not apply if arrangements— (a) under which the person entitled to the relevant interest acquired it, or (b) which were made in connection with its acquisition, include provision which requires, or makes substantially more likely, any of the events set out in subsection (4). (4) The events are— (a) the subsequent sale of the relevant interest; (b) the subsequent grant of an interest in land out of the relevant interest; (c) any other event on which capital value attributable to the subordinate interest would be paid or treated as paid.
Propose a change(1) “Capital value” means any capital sum— (a) including what would have been a capital sum if it had been a money payment (and references to payment are to be read accordingly), but (b) excluding so much of any sum as corresponds to — (i) an amount brought into account as a receipt in calculating the profits of a property business under sections 217 to 221 of CTA 2009 that is calculated by reference to the sum, or (ii) an amount brought into account as a receipt in calculating the profits of a UK property business under sections 277 to 281 of ITTOIA 2005 that is calculated by reference to the sum. (2) “Interest in land” means— (a) a leasehold estate in the land, whether in the nature of a head lease, sub-lease or under-lease; (b) an easement or servitude; (c) a licence to occupy land. (3) References to granting an interest in land include agreeing to grant any such interest. (4) In section 329— “commercial amount” means the amount that would have been given if the transaction had been at arm’s length, “commercial premium” means the premium that would have been given if the transaction had been at arm’s length, and “commercial rent” means such rent as may reasonably be expected to have been required in respect of the subordinate interest (having regard to any premium paid in consideration of the grant of the interest) if the transaction had been at arm’s length. (5) In the application of section 329 to Scotland, references to assignment are to be read as references to assignation.
Propose a changeFor the purposes of this Part qualifying expenditure is written off to the extent and at the times specified in this Chapter.
Propose a changeIf an initial allowance is made in respect of the qualifying expenditure, the amount of the allowance is written off at the time when the building is first used.
Propose a change(1) 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. (2) If a balancing event occurs at the end of the chargeable period referred to in subsection (1), 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.
Propose a change(1) If an allowance under Part 6 (research and development allowances) 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. (2) If a balancing event occurs at the end of the chargeable period referred to in subsection (1), the amount written off under that subsection is to be taken into account in calculating the residue of qualifying expenditure immediately before that event to determine what balancing adjustment (if any) is to be made.
Propose a change(1) This section applies if for any period or periods between— (a) the time when the building was first used for any purpose, and (b) the time when the residue of qualifying expenditure falls to be ascertained, the building was not an industrial building. (2) An amount equal to the notional writing-down allowances for the period or periods is written off at the time when the residue falls to be ascertained. (3) The notional writing-down allowances are the allowances that would have been made for the period or periods in question (if the building had remained an industrial building), at such rate or rates as would have been appropriate having regard to any relevant sale. (4) In subsection (3) “relevant sale” means a sale of the relevant interest as a result of which a balancing adjustment falls to be made under section 314.
Propose a change(1) This section applies if the relevant interest in the building is sold. (2) If a balancing allowance is made, the amount by which the residue of qualifying expenditure before the sale exceeds the net proceeds of the sale is written off at the time of the sale. (3) If a balancing charge is made, the amount of the residue of qualifying expenditure is increased at the time of the sale by the amount of the charge. (4) But if the balancing charge is made under section 319(6) (difference between net allowances made and adjusted net cost), the residue of qualifying expenditure immediately after the sale is limited to the net proceeds of the sale.
Propose a changeIf a balancing event within section 328 occurs (realisation of capital value), an amount equal to any capital value realised is written off at the time of the event.
Propose a change(1) This section applies if at any time— (a) the Crown, or (b) a person who is not within the charge to tax, (“A”) is entitled to the relevant interest in a building. (2) Sections 333 to 338 (writing off qualifying expenditure) have effect as if all writing-down allowances and balancing adjustments had been made as could have been made if— (a) a person (“B”) who— (i) is not the Crown, (ii) is within the charge to tax, and (iii) is not a company, had been entitled to the relevant interest, and (b) the other assumptions in subsection (3) had been made. (3) The assumptions are that— (a) while A was entitled to the relevant interest, all things which were done in relation to the building— (i) by or to A, or (ii) by or to a person using the building under the authority of A, were done by or to B for the purposes of, and in the course of, a trade carried on by B, (b) any sale of the relevant interest in the building by or on behalf of A was made in connection with the termination of the trade carried on by B, and (c) B’s periods of account for that trade had, in the case of each tax year, ended immediately before the beginning of the next tax year.
Propose a change(1) This section applies if— (a) a building is demolished, and (b) the person to or on whom any balancing allowance or balancing charge is or might be made is the person incurring the cost of the demolition. (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 property. (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 other than Part 10 (assured tenancy allowances) as expenditure on any other property replacing the property demolished.
Propose a change(1) For the purposes of this Part the carrying on of a highway undertaking is to be treated as the carrying on of an undertaking by way of trade; and accordingly references in this Part (except sections 274 and 276) to a trade include a highway undertaking. (2) For the purposes of this Part a person carrying on a highway undertaking is to be treated as occupying, for the purposes of the undertaking, any road in relation to which it is carried on. (3) In this Chapter “highway undertaking” has the meaning given in item 6 of Table B in section 274. (4) In that item and this Chapter “highway concession”, in relation to a road, means— (a) a right to receive sums from the relevant authority because the road is or will be used by the general public, or (b) if the road is a toll road, the right to charge tolls in respect of the road. (5) In subsection (4) “ the relevant authority ” means— (a) the Secretary of State, (b) the Scottish Ministers, (c) the National Assembly for Wales, or (d) the Department for Regional Development in Northern Ireland.
Propose a change(1) For the purposes of Chapter 3 (the relevant interest in the building) as it applies to expenditure incurred on the construction of a road, a highway concession is not to be treated as an interest in the road. (2) But if the person who incurred the expenditure on the construction of the road— (a) was not entitled to an interest in the road when he incurred the expenditure, but (b) was at that time entitled to a highway concession in respect of the road, the highway concession is to be treated as the relevant interest in relation to that expenditure. (3) Any question as to what is the relevant interest is to be determined on the assumption that, if section 344 (renewed or new concession treated as extension of earlier concession) applies, the renewed or new concession is a continuation of the earlier concession.
Propose a change(1) If— (a) the relevant interest is a highway concession, and (b) the concession is brought to or comes to an end without being treated as extended under section 344, the ending of the concession is a balancing event. (2) The proceeds from such a balancing event are— (a) any insurance money received by the person entitled to the highway concession in respect of any qualifying expenditure, and (b) other compensation so received so far as it consists of capital sums.
Propose a change(1) A highway concession in respect of a road is to be treated as extended if— (a) the person entitled to the concession takes up a renewed concession in respect of the whole or a part of the road, or (b) that person or a person connected with him takes up a new concession in respect of— (i) the whole or a part of the road, or (ii) a road that includes the whole or a part of the road. (2) But the concession is to be treated as extended only— (a) to the extent that the concession which has in fact ended, and the renewed or new concession, relate to the same road, and (b) for the period of the renewed or new concession. (3) A person takes up a renewed or new concession if he is afforded, whether or not under legally enforceable arrangements, an opportunity to be granted the renewed or new concession and takes advantage of the opportunity. (4) For the purposes of subsection (3) it does not matter whether the renewed or new concession is on the same terms as the previous concession or on modified terms. (5) If— (a) a highway concession is treated as extended under this section, and (b) the period of the extension is different in relation to different parts of the road in relation to which the concession has been granted, such apportionments are to be made for the purposes of section 343 as are just and reasonable.
Propose a changeFor the purposes of this Chapter— (a) “additional VAT liability” and “additional VAT rebate” have the meaning given by section 547, (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 additional VAT liability or an additional VAT rebate accrues are given by section 549.
Propose a change(1) This section applies if— (a) a person was entitled to an initial allowance in respect of qualifying enterprise zone expenditure, (b) the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure, (c) the additional VAT liability is incurred at a time when the building is, or is to be, an industrial building— (i) occupied by the person entitled to the relevant interest or a qualifying lessee, or (ii) used by a qualifying licensee, and (d) the additional VAT liability is incurred not more than 10 years after the site of the building was first included in the enterprise zone. (2) If this section applies, the person entitled to the relevant interest is entitled to an initial allowance on the amount of the additional VAT liability. (3) The amount of the initial allowance is 100% of the amount of the additional VAT liability. (4) A person claiming an initial allowance under this section may require the allowance to be reduced to a specified amount. (5) The allowance is made for the chargeable period in which the additional VAT liability accrues. (6) The persons mentioned in subsection (1)(a) and (b) need not be the same.
Propose a change(1) This section applies if the person entitled to the relevant interest in relation to qualifying expenditure incurs an additional VAT liability in respect of that expenditure. (2) If this section applies— (a) the additional VAT liability is treated as qualifying expenditure, and (b) the amount of the residue of qualifying expenditure is accordingly increased at the time when the liability accrues by the amount of the liability. (3) The incurring of the additional VAT liability is a relevant event for the purposes of section 311 (calculation of writing-down allowances) that is to be treated as occurring at the time when the liability accrues.
Propose a changeIf an initial allowance is made in respect of an additional VAT liability incurred after the building is first used, the amount of the allowance is written off at the time when the liability accrues.
Propose a change(1) This section applies if— (a) an additional VAT rebate is made in respect of qualifying expenditure to the person entitled to the relevant interest in relation to that qualifying expenditure, and (b) immediately before the rebate accrues, the residue of that qualifying expenditure is equal to, or greater than, the amount of the rebate. (2) The making of the additional VAT rebate is a relevant event for the purposes of section 311 (calculation of writing-down allowances) that is to be treated as occurring at the time when the rebate accrues.
Propose a change(1) If an additional VAT rebate is made in respect of qualifying expenditure to the person entitled to the relevant interest in relation to that qualifying expenditure— (a) the making of the rebate is a balancing event for the purposes of this Part, but (b) the making of balancing adjustments as a result of the event is subject to subsections (2) and (3). (2) No balancing allowance is to be made as a result of the event. (3) A balancing charge is not to be made as a result of the event unless— (a) the amount of the additional VAT rebate is more than the amount of the residue of qualifying expenditure immediately before the time when the rebate accrues, or (b) there is no such residue. (4) The amount of the balancing charge is— (a) the amount of the difference, or (b) the amount of the rebate (if there is no residue). (5) If a balancing charge is made under this section, the starting expenditure is reduced by the amount of that charge in a case where section 322(2) applies (person subject to balancing adjustment is the person who incurred the qualifying expenditure).
Propose a change