Capital Allowances Act 1968
| Jurisdiction | UK Non-devolved |
| Citation | 1968 c. 3 |
| Year | 1968 |
Capital Allowances Act 1968
1968 CHAPTER 3
An Act to consolidate Parts X and XI of the Income Tax Act 1952 with related provisions in that Act and subsequent Acts, but without the provisions of the said Part X relating to patents or to agricultural estate management expenditure which is not capital expenditure.
[1st February 1968]
Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Part I
The Main Reliefs for Capital Expenditure
Chapter I
Industrial Buildings and Structures, etc.
1 Initial allowances.
(1) Subject to the provisions of this Act, where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade carried on either by that person or by such a lessee as is mentioned in subsection (3) of this section, there shall be made to the person who incurred the expenditure, for the chargeable period mentioned in subsection (4) below, an allowance (in this Chapter referred to as ‘an initial allowance’).
(2) An initial allowance shall be of an amount equal to three-twentieths of the capital expenditure mentioned in subsection (1) above:
Provided that this subsection shall have effect subject to the provisions of Schedule 1 to this Act.
(3) The lessees mentioned in subsection (1) above are lessees occupying the building or structure on the construction of which the expenditure was incurred under a lease to which the relevant interest, as defined in section 11 of this Act, is reversionary.
(4) The chargeable period mentioned in subsection (1) above shall, in the case of a person incurring expenditure, be the chargeable period related to the incurring of that expenditure:
Provided that where the first use to which the building or structure is put is a use by a person occupying it by virtue of a tenancy to which the relevant interest is reversionary, and the tenancy begins after the incurring of the expenditure, the said chargeable period shall be the chargeable period in which the tenancy begins.
(5) Notwithstanding anything in this section, no initial allowance shall be made in respect of any expenditure if, when the building or structure comes to be used, it is not an industrial building or structure, and where an initial allowance has been granted in respect of any expenditure otherwise than in accordance with the provisions of this section, all such assessments shall be made as are necessary to secure that effect is given to those provisions.
(6) Any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated for the purposes of the preceding provisions of this section as if it had been incurred by that person on the first day on which he does carry it on.
2 Writing-down allowances.
(1) Subject to the provisions of this Act, where—
(a ) any person is, at the end of a chargeable period or its basis period, entitled to an interest in a building or structure, and
(b ) at the end of the said chargeable period or its basis period, the building or structure is an industrial building or structure, and
(c ) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure,
an allowance (in this Chapter referred to as ‘a writing-down allowance’) shall be made to him for the said chargeable period.
(2) The writing-down allowance shall be equal to one-twentyfifth (or, where the expenditure was incurred before 6th November 1962, one-fiftieth) of the expenditure mentioned in subsection (1)(c ) above, except that for a chargeable period of less than a year the said fraction of one-twentyfifth or one-fiftieth shall be proportionately reduced.
(3) Where the interest in a building or structure which is the relevant interest in relation to any expenditure is sold while the building or structure is an industrial building or structure, then (subject to any further adjustment under this subsection on a later sale) the writing-down allowance for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue (as defined in section 4(1) of this Act) of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of twenty-five years (or, where the expenditure was incurred before 6th November 1962, fifty years) beginning with the time when the building or structure was first used.
(4) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of a writing-down allowance made to a person for any chargeable period in respect of any expenditure exceed what, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period or its basis period.
3 Balancing allowances and balancing charges.
(1) 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 or structure is an industrial building or structure, 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,
an allowance or charge (in this Chapter referred to as ‘a balancing allowance’ or ‘a balancing charge’) shall, in the circumstances mentioned in this section, 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:
Provided that no balancing allowance or balancing charge shall be made by reason of any event occurring more than twenty-five years (or, where the expenditure was incurred before 6th November 1962, fifty years) after the building or structure was first used.
(2) 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, and the amount thereof shall be the amount of the said residue or, as the case may be, of the excess thereof over the said moneys.
(3) 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 the said moneys.
(4) Where a balancing charge falls to be made on a person, and any part of the relevant period (as defined for the purposes of this subsection) is not comprised in a chargeable period for which a writing-down allowance or scientific research allowance has been made to him or its basis period, the amount on which the balancing charge is to be made shall be reduced in the proportion which the part or parts that are so comprised bear to the whole of the relevant period.
In this subsection ‘the relevant period’ means the period beginning when the building or structure was first used for any purpose and ending—
(a ) if the event giving rise to the balancing charge occurs on the last day of a chargeable period or its basis period, with that day, or
(b ) if not, with the latest date before that event which is the last day of a chargeable period or its basis period:
Provided that where, before the said event (but not before the appointed day), the building or structure has been sold while an industrial building or structure, the relevant period shall begin with the day following that sale or, if there has been more than one such sale, the last such sale.
(5) Where any person by notice in writing to the inspector so elects in relation to any such event as is mentioned in subsection (1) of this section, being an event which gives rise to a balancing allowance, he shall, in relation to that event, be treated for all the purposes of this Act—
(a ) as if subsection (4) of this section applied to that balancing allowance, and
(b ) as if, for the purposes of the application thereof—
(i) the reference to the amount on which the balancing charge is to be made were a reference to the amount of the balancing allowance, and
(ii) the references to the event which gives rise to the balancing charge were references to the event which gives rise to the balancing allowance.
(6) Notwithstanding anything in the preceding provisions of this section, 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 scientific research 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 or of...
To continue reading
Request your trial