409G Termination of capital allowances

(1) Provision is made in relation to individuals, that any unused specified capital allowances which are carried forward into a relevant tax year in a trading or rental context (sections 304 and 305) are lost. In the context of a trade, this restriction does not apply to the active trader or active partner (subsection (5)). This provision is subject to subsection (6).

(2) Provision is made in relation to companies, that any unused specified capital allowances which are carried forward into a relevant accounting period or back into a previous accounting period (section 308 (3) and (4)) in a rental context, are lost. This restriction does not apply to a trading company and is subject to subsection (6).

(3) Provision is made in relation to individuals, that any unused area-based capital allowances which are carried forward into a relevant tax year in a trading or rental context (sections 304 and 305) are lost. In the context of a trade, this restriction does not apply to the active trader or active partner (subsection (5)). This provision is subject to subsection (6).

(4) Provision is made in relation to companies that any unused area-based capital allowances which are carried forward into a relevant accounting period or back into a previous accounting period (section 308 (3) and (4)) in a rental context, are lost. This restriction does not apply to a trading company and is subject to subsection (6).

(5) In relation to individuals, none of the specified capital allowances or area-based capital allowances are lost in the case of an active trader or active partner.

(6) In a small number of circumstances in which a balancing charge may apply (on disposal of a building, for example) to a person, even though the tax life of the building or structure has already ended, the balancing charge may be reduced by an amount equal to the unused capital allowance which would have been available to set against it, but for the operation of this section. Without this provision, the operation of the balancing charge would be excessive.

Relevant Date: Finance Act 2021