Capital Allowances Act 1990 (repealed)

4 Balancing allowances and balancing charges. U.K.

(1) Subject to section 5, where any capital expenditure has been incurred on the construction of a building or structure, and any of the following events occurs while the building is an industrial building or structure or after it has ceased to be one, that is to say—

(a) the relevant interest in the building or structure is sold, or

(b) that interest, being an interest depending on the duration of a foreign concession, comes to an end on the coming to an end of that concession, or

(c) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon, or

(d) the building or structure is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,[F1 or

[F2 (da) that interest, being a highway concession, is brought to or comes to an end, or]

[F3 (dd) any capital value is realised (within the meaning of section 4A), or]

(e) an additional VAT rebate in respect of any of the capital expenditure is made to the person entitled to the relevant interest,]

an allowance or charge (“a balancing allowance" or “a balancing charge") shall, in the circumstances mentioned in this section and subject to [F4 subsections (2) and (9A)] below, be made to, or, as the case may be, on, the person entitled to the relevant interest immediately before that event occurs, for the chargeable period related to that event.

(2) No balancing allowance or balancing charge shall be made by reason of any event occurring more than 25 years (or, where the expenditure was incurred before 6th November 1962, 50 years) after the building or structure was first used and where two or more events [F5 falling within paragraphs (a) to (d) of subsection (1) above] occur during a period when the building or structure is not an industrial building or structure no balancing allowance or balancing charge shall be made on the occurrence of any of those events except the first.

[F6 (2AA) No balancing allowance or balancing charge shall be made by reason of an event falling within paragraph (da) of subsection (1) above if the period for which the concession was granted is deemed for the purposes of this subsection to be extended to include any period after the end of the concession; and for the purposes of this subsection where in the case of any highway concession that period is or is deemed to be different in relation to different parts of the road in respect of which it has been granted such apportionment shall be made for the purposes of this subsection as may be just and reasonable.

(2AB) Where a highway concession in respect of any road (“the prior concession”) is brought to or comes to an end in circumstances in which—

(a) the person entitled to that concession is afforded (whether or not in pursuance of any legally enforceable arrangements), and takes advantage of, an opportunity to be granted a renewal of the concession, on the same or modified terms, in respect of the whole or any part of that road, or

(b) that person, or a person who is connected with that person within the terms of section 839 of the principal Act, is so afforded, and takes advantage of, an opportunity to be granted a new concession, on the same or modified terms, in respect of, or of a road that includes, the whole or any part of that road,

then to the extent that the prior concession and the renewed or new concession relate to the same road, the period of the prior concession shall be deemed, for the purposes of subsection (2AA) above, to have been extended or further extended for the period of the renewed or new concession and any question for the purposes of this Part as to what constitutes the relevant interest at any time after the renewal, or (as the case may be) the grant of the new concession, shall be determined on the assumption that the renewed or new concession is a continuation of the prior concession.]

F7 [(2A) No balancing allowance shall be made by reason of an event falling within paragraph (e) of subsection (1) above; and no balancing charge shall be made by reason of such an event unless—

(a) the amount of the additional VAT rebate exceeds the residue of expenditure immediately before the making of that rebate, or

(b) there is no such residue,

and in any such case a balancing charge shall be made on an amount equal to that by which the rebate exceeds the residue of expenditure immediately before the making of the rebate or, where there is no such residue, to the amount of the rebate.]

(3) Where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made the amount of which shall be the amount of that residue or, as the case may be, of the excess of the residue over those moneys.

(4) If the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to those moneys.

(5) If for any part of the relevant period the building or structure was neither an industrial building or structure nor used for [F8 research and development], subsections (6) to (9) below shall have effect instead of subsections (3) and (4) above.

(6) Subject to subsection (8) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.

(7) Subject to subsection (8) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure, then—

(a) if the adjusted net cost of the building or structure exceeds the allowances given, a balancing allowance shall be made the amount of which shall be an amount equal to the excess;

(b) if the adjusted net cost of the building or structure is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall.

(8) No balancing charge or allowance shall be made under subsection (6) or (7) above on the occasion of a sale if by virtue of section 158 the building or structure is treated as having been sold for a sum equal to the residue of the expenditure on its construction immediately before the sale.

(9) In subsections (5) to (7) above and this subsection—

• “the relevant period” means the period beginning at the time when the building or structure was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge except that where there has been a sale of the building or structure after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale;

• “the capital expenditure” means—

  (a)

  where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of section 10(1) [F9 10A [F10 10B or 10C]]deemed to have been occurred) on the construction of the building or structure [F11 reduced by an amount equal to that of any balancing charge made in relation to that expenditure on the occurrence of an event falling within subsection (1)(e) above;]

  (b)

  where the person to or on whom the balancing allowance or charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure, the residue of that expenditure at the beginning of the relevant period,

  together (in either case) with any amount to be added to the residue of that expenditure by virtue of section 8(12);

• “the allowances given” means the allowances referred to in subsection (10) below;

• “the adjusted net cost” means—

  (a)

  where there are no sale, insurance, salvage or compensation moneys, the capital expenditure;

  (b)

  where those moneys are less than that expenditure, the amount by which they are less,

  reduced (in either case) in the proportion that the part, or the aggregate of the parts, of the relevant period for which the building or structure was an industrial building or structure or used for [F12 research and development] bears to the whole of that period;

• “[F12 research and development]” has the same meaning as in Part VII.

[F13 (9A) No balancing allowance shall be made by reason of any event falling within subsection (1)(dd) above; and (subject to that) in relation to such an event—

(a) this Part and (so far as relating to it) Part VIII shall have effect as if references to sale, insurance, salvage or compensation moneys were references to the capital value realised, and

(b) subsections (5) to (7) and (9) above shall have effect as if immediately after the event the capital expenditure were reduced by the amount of the capital value realised]

(10) Notwithstanding anything in subsections (1) to (9) above, in no case shall the amount on which a balancing charge is made on a person in respect of any expenditure on the construction of a building or structure exceed the amount of the initial allowance, if any, made to him in respect of that expenditure together with the amount of any writing-down allowances or [F12 research and development] allowances in respect of that expenditure, and any relevant mills, factories or exceptional depreciation allowances in respect of that building or structure, made to him for chargeable periods which end on or before the date of the event giving rise to the charge F14 ... [F15 reduced by the amounts (if any) on which balancing charges in respect of the expenditure have been made on him for any such chargeable periods].

(11) Where—

(a) before 6th April 1990, a woman was entitled to the relevant interest in relation to expenditure incurred on the construction of a building or structure (whether she was entitled to it when the expenditure was incurred or acquired it afterwards);

(b) for a chargeable period ending before that date, an allowance such as is mentioned in subsection (10) above was made to the woman’s husband in respect of her relevant interest; and

(c) on or after that date there occurs an event such as is mentioned in subsection (1) above in respect of which the woman is entitled to all or part of any sale, insurance, salvage or compensation moneys,

the allowance shall be treated for the purposes of subsection (10) above as having been made to the woman.

(12) In subsection (10) above “relevant mills, factories or exceptional depreciation allowances”, in relation to any building or structure, means —

(a) any allowance granted for a year of assessment under section 15 of the M1 Finance Act 1937 in respect of it or premises of which it forms part, including any amount which under that section was to be allowed as a deduction in computing profits or gains for that year of assessment, (but where such an allowance was granted in respect of premises which include several buildings or structures, the whole amount of that allowance shall be apportioned between all the buildings and structures and only that part of the allowance which is apportioned to the building or structure in question shall be taken into account), and

(b) any allowance made under section 19 of the M2 Finance Act 1941 in respect of that building or so much of any such allowance granted in respect of any building of which it forms part as is properly attributable to it.

Textual Amendments

F1 S. 4(1)(e) and word preceding it inserted (for any chargeable period or its basis period ending on or after 06.04.1990) by Finance Act 1991 (c. 31), s. 59 Sch. 14 Pt. I para. 4(1).

F2 S. 4(1)(da) inserted (with effect in accordance with s. 99(10) of the amending Act) by Finance Act 1995 (c. 4), s. 99(3)

F3 S. 4(1)(dd) inserted (3.5.1994) by Finance Act 1994 (c. 9), s. 120(2)(a) (with s. 120(7))

F4 Words in s. 4(1) substituted (3.5.1994) by Finance Act 1994 (c. 9), s. 120(2)(a) (with s. 120(7))

F5 Words in s. 4(2) inserted(for any chargeable period or its basis period ending on or after 06.04.1990) by Finance Act 1991 (c. 31), s. 59, Sch. 14 Pt. I para. 4(2).

F6 S. 4(2AA)(2AB) inserted (with effect in accordance with s. 99(10) of the amending Act) by Finance Act 1995 (c. 4), s. 99(4)

F7 S. 4(2A) inserted(for any chargeable period or its basis period ending on or after 06.04.1990) by Finance Act 1991 (c. 31), s. 59, Sch. 14 Pt. I para. 4(3).

F8 Words in s. 4(5) substituted (with effect in accordance with s. 68(1)(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 19 paras. 7, 8

F9 Words in s. 4(9) inserted (16.7.1992) by Finance (No. 2) Act 1992 (c. 48), s. 70, Sch. 13 paras 13, 17

F10 Words in s. 4(9)(a) definition of the “capital expenditure” substituted (27.7.1993 with effect as mentioned in s. 113(7) of the amending Act) by 1993 c. 34, s. 113(2)(7)

F11 Words in s. 4(9) added (for any chargeable period or its basis period ending on or after 06.04.1990) by Finance Act 1991 (c. 31), s. 59, Sch. 14 Pt. I para. 4(4).

F12 Words in s. 4(9)(10) substituted (with effect in accordance with s. 68(1)(2) of the amending Act) by Finance Act 2000 (c. 17), Sch. 19 paras. 7, 8

F13 S. 4(9A) inserted (3.5.1994) by Finance Act 1994 (c. 9), s. 120(2)(b) (with s. 120(7))

F14 Words in Act repealed (with effect in accordance with s. 211(2) of the amending Act) by Finance Act 1994 (c. 9), s. 213(1), Sch. 26 Pt. 5(24)

F15 Words in s. 4(10) added (for any chargeable period or its basis period ending on or after 06.04.1990) by Finance Act 1991 (c. 31), s. 59, Sch. 14 Pt. I para. 4(5).

Modifications etc. (not altering text)

C1 S. 4 modified (with effect in accordance with Sch. 33 para. 5 of the amending Act) by Greater London Authority Act 1999 (c. 29), s. 425(2), Sch. 33 para. 4(9)(b); S.I. 1999/3434, art. 2

Marginal Citations

M1 1937 c. 54.

M2 1941 c. 30.