Capital Allowances Act 1990

8Writing off of expenditure and meaning of “residue of expenditure”

(1)Any expenditure incurred on the construction of any building or structure shall be treated for the purposes of this Part as written off to the extent and as at the times specified below in this section, and references in this Part to the residue of any such expenditure shall be construed accordingly.

(2)Where an initial allowance is made in respect of the expenditure, the amount of that allowance shall be treated as written off as at the time when the building or structure is first used.

(3)Subject to subsection (4) below, where, by reason of the building or structure being at any time an industrial building or structure, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall be treated as written off as at the end of that period or its basis period.

(4)Where, at the time referred to in subsection (3) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that subsection as at that time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

(5)Subject to subsection (6) below, where a scientific research allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall be treated as written off—

(a)in the case of an allowance under section 137, as at the end of the chargeable period or, if it is a year of assessment, as at the end of the basis year (as defined in section 137(6)) for that year of assessment, and

(b)in the case of an allowance under section 138, as at the time when the asset ceases to be used by the person in question for scientific research connected with the trade.

(6)Where, at the time as at which an amount falls to be treated as written off under subsection (5) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that subsection as at that time shall be taken into account in computing the residue of the expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

(7)If, for any period or periods between the time when the building or structure was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or structure has not been in use as an industrial building or structure, then there shall in ascertaining that residue be treated as having been previously written off in respect of that period or those periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which section 3(3) operated.

(8)For the purposes of subsection (7) above a building or structure shall not be treated—

(a)by virtue of section 18(1)(c) as having been an industrial building or structure before the year 1952-53,

(b)by virtue of section 18(1)(j) or (10) as having been an industrial building or structure before the year 1953-54.

(9)Where, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be treated as written off as at the time of the sale the amount by which the expenditure before the sale exceeds the net proceeds of the sale.

(10)Where, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Part to be increased as at the time of the sale by the amount on which the charge is made.

(11)Where, on the occasion of a sale, a balancing charge is made under section 4(7)(b) in respect of the expenditure and, apart from this subsection, the residue of the expenditure immediately after the sale would by virtue of subsection (10) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Part to be equal to the net proceeds.

(12)Where a building or structure is demolished, and the demolition gives rise, or might give rise, to a balancing allowance or charge under this Part to or on the person incurring the cost of demolition, the net cost to him of the demolition (that is to say, the excess, if any, of the cost of the demolition over any moneys received for the remains of the property) shall be added for the purposes of this Part to the residue, immediately before the demolition, of the expenditure incurred on the construction of the property; and if this subsection applies to the net cost to a person of the demolition of any property, the cost or net cost shall not be treated for the purposes of this Act (other than Part III) as expenditure incurred in respect of any other property by which that property is replaced.

(13)Where the Crown is at any time entitled to the relevant interest in a building or structure, subsections (1) to (12) above shall have effect as if all such writing-down allowances, balancing allowances and balancing charges had been made as could have been made if—

(a)a person other than the Crown and other than a company had been entitled to the relevant interest, and

(b)all things which, while the Crown is entitled to the relevant interest, have been done in relation to the building or structure by or to the Crown or by or to any person using the building or structure under the authority of the Crown, had been done by or to that other person, for the purposes of and in the course of a trade carried on by him, and

(c)any sale or other disposition by or on behalf of the Crown of the relevant interest in the building or structure had been made in connection with the termination of that trade, and

(d)the basis periods of that other person in respect of that trade had, in the case of each year of assessment, ended immediately before the beginning of the year of assessment.

(14)In relation to sales occurring after the passing of the [1988 c. 39.] Finance Act 1988 (29th July 1988), references in subsection (13) above to the Crown shall include references to any person who is not within the charge to tax in the United Kingdom.