Capital Allowances Act 2001

Additional VAT liabilities and rebates

Additional VAT liabilities and initial allowances: 1992-93 cases

75(1)This paragraph applies if—

(a)a person was entitled to an initial allowance in respect of 1992-93 qualifying expenditure,

(b)the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure, and

(c)the additional VAT liability is incurred at a time when the building is, or is to be, an industrial building—

(i)occupied for the purposes of a trade carried on by the person entitled to the relevant interest or a qualifying lessee, or

(ii)used for the purposes of trade carried on by a qualifying licensee.

(2)If this paragraph 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 20% of the additional VAT liability.

(4)The allowance is made for the chargeable period in which the additional VAT liability accrues.

(5)The persons mentioned in sub-paragraph (1)(a) and (b) need not be the same.

(6)In this paragraph “qualifying lessee” and “qualifying licensee” have the same meaning as in section 305.

Additional VAT liabilities and initial allowances: further case

76(1)This paragraph applies if—

(a)a person was entitled to an initial allowance in respect of qualifying enterprise zone expenditure, and

(b)the person entitled to the relevant interest in relation to that expenditure incurs an additional VAT liability in respect of that expenditure,

but there is no entitlement to an initial allowance under section 346 because the condition in subsection (1)(d) of that section is not met.

(2)If in such a case—

(a)the conditions in paragraph 74(1) are met except for the condition that the original entitlement to an initial allowance was in respect of 1992-93 qualifying expenditure, and

(b)some or all of the qualifying enterprise zone expenditure would have been 1992-93 qualifying expenditure but for paragraph 76(2),

the person entitled to the relevant interest is entitled to an initial allowance under paragraph 74(3) on the appropriate part or on all of the additional VAT liability (as the case may be).

(3)The allowance is made for the chargeable period in which the additional VAT liability accrues.

1992-93 qualifying expenditure

77(1)“1992-93 qualifying expenditure” means expenditure which is—

(a)qualifying expenditure which is within section 294 and is 1992-93 construction expenditure, or

(b)the 1992-93 element of qualifying expenditure which is within section 295 or 296.

(2)Qualifying enterprise zone expenditure is not to be taken into account as 1992-93 qualifying expenditure for the purposes of sub-paragraph (1).

(3)Expenditure is 1992-93 construction expenditure if it was incurred on the construction of a building under a contract which was entered into—

(a)in the period beginning with 1st November 1992 and ending with 31st October 1993, or

(b)for the purpose of securing compliance with obligations under a contract entered into in that period,

and which was not entered into for the purpose of securing compliance with obligations under a contract entered into before 1st November 1992.

(4)The 1992-93 element of qualifying expenditure within section 295 or 296 is—

(5)If the expenditure on the construction of the building was incurred by a person carrying on a trade as a developer who—

(a)was entitled to the relevant interest in the building before 1st November 1992, and

(b)sold that interest in the course of that trade under a contract entered into in the period beginning with 1st November 1992 and ending with 31st October 1993,

the 1992-93 construction expenditure for the purposes of sub-paragraph (4) includes any expenditure on the construction of the building incurred under a contract entered into before 1st November 1993 or for the purpose of securing compliance with obligations under such a contract.