Finance Act 1986

Expenditure on the acquisition of land: restriction of qualifying expenditure

16 (1) In so far as capital expenditure falling within paragraph 4(1)(b) above consists of expenditure on the acquisition of an interest in land (whether in the United Kingdom or elsewhere) and that land includes a source of mineral deposits, so much of that expenditure as is equal to the undeveloped market value of the interest shall not constitute qualifying expenditure.

(2) In relation to the acquisition of an interest in land, the undeveloped market value means the consideration which at the time of the acquisition the interest might reasonably be expected to fetch on a sale in the open market on the assumptions—

(a) that there is no source of mineral deposits on or in the land; and

(b) that it is and will continue to be unlawful to carry out any development of the land other than—

(i) development which, at the time of the acquisition, has been or has begun to be lawfully carried out; and

(ii) any other development for which planning permission is granted by a development order which is made as a general order and is in force at that time.

(3) In the application of sub-paragraph (2) above to the acquisition of an interest in land outside the United Kingdom.—

(a) any question whether development has been or is being lawfully carried out shall be determined in accordance with the law of the territory in which the land is situated; and

(b) any question whether development is of a character for which planning permission is granted by a general development order shall be determined as if the land were situated in England or Wales.

(4) In any case where—

(a) the preceding provisions of this paragraph have effect to limit the amount of expenditure falling within paragraph 4(1) above which is qualifying expenditure, and

(b) the undeveloped market value of the interest in land in question includes the value of any buildings or other structures on the land, and

(c) at the time of the acquisition of the interest in land or at any time thereafter, those buildings or structures cease permanently to be used for any purpose,

then at the time referred to in paragraph (c) above, the person who incurred the expenditure referred to in paragraph (a) above shall be treated as having incurred qualifying expenditure falling within paragraph 4(1 )(b) above equal to the unrelieved value of the buildings or structures referred to in paragraph (b) above.

(5) In sub-paragraph (4) above "the unrelieved value" of buildings or structures falling within paragraph (b) thereof means the value of those buildings or structures determined as at the date of the acquisition of the interest in land (and without regard to any value properly attributable to the land on which the buildings or structures stand) less the excess of any allowances over balancing charges which the person treated by sub-paragraph (4) above as incurring expenditure has received in respect of the buildings or structures or assets therein under—

(a) the [1968 c. 3.] Capital Allowances Act 1968;

(b) Chapter I of Part III of the [1971 c. 78.] Finance Act 1971 (machinery or plant); and

(c) section 55 of this Act.

(6) References in the preceding provisions of this paragraph to the time of the acquisition of an interest in land are not affected by paragraph 3 of this Schedule.

17 In any case where—

(a) a person incurs capital expenditure falling within paragraph 4(1 )(b) above on the acquisition of an asset which is or includes an interest in land, and

(b) for chargeable periods previous to the chargeable period for which he first becomes entitled in respect of the expenditure to an allowance under paragraph 9 above, the person incurring the expenditure has been allowed, in respect of that land, any deductions under section 134 of the Taxes Act (deductions where premiums etc. taxable),

the expenditure shall be treated for the purposes of this Schedule as reduced by so much of those deductions as would have been excluded by subsection (5) of the said section 134 if the person concerned had been entitled to an allowance under paragraph 9 above (or, as the case may be, section 60 of the [1968 c. 3.] Capital Allowances Act 1968) for the previous chargeable periods referred to in sub-paragraph (b) above.