Revenue Note for Guidance

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Revenue Note for Guidance

278 Manner of making allowances and charges

Summary

Except in certain cases, industrial building (initial) allowances, writing-down allowances and balancing allowances and charges are to be made in taxing the trade of the person entitled to the allowance. By virtue of section 321(4), this means that the allowances or charges are to be made, in the case of income tax, in charging the profits or gains of the trade and, in the case of corporation tax, in computing the income of the trade. Where the person entitled to the allowance or who is subject to a balancing charge is a lessor chargeable under Case V of Schedule D, the allowance or charge is to be made in charging that person’s income under that Case. In certain stated instances the allowances are made by means of repayment or discharge of tax.

Details

Allowances to be made in taxing the trade or in charging income under Case V of Schedule D

(1) Any allowance or charge made to or on a person in respect of capital expenditure on an industrial building or structure is to be made to or on the person in taxing the person’s trade or, in the case of a lessor of an industrial building or structure who is chargeable under Case V of Schedule D, in charging the person’s income under that Case. For income tax purposes, the making of an allowance or charge in taxing the trade requires the allowance to be deducted from, or the charge to be added to, the taxable profits of the trade as computed under Case I of Schedule D. For the purposes of corporation tax, it requires the allowance to be deducted, or the charge to be added, in computing the trading income.

Lessors not chargeable under Case V of Schedule D

(2) to (5) In the exceptional case where the person entitled to an industrial building (initial) allowance, a writing-down allowance or a balancing allowance is a lessor who is not chargeable to tax under Case V of Schedule D, the industrial building allowance, writing-down allowance or balancing allowance is made by way of discharge or repayment of tax. Similarly, where a lessor of an industrial building or structure is not chargeable under Case V of Schedule D, any balancing charge to be made on the lessor is made under Case IV of that Schedule.

Allowances to lessors available primarily against rental income

(6) Any industrial building (initial) allowance, writing-down allowance or balancing allowance to be made to a lessor is, in the case of a lessor chargeable under Case V of Schedule D, available primarily against income chargeable under that Case or any balancing charge under that Case and, in the case of a lessor chargeable under Case IV of Schedule D, available primarily against income chargeable under that Case or any balancing charge under that Case.

Relevant Date: Finance Act 2020