769C Effect of lapse of capacity rights.

(1) Where a company incurs ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] on the purchase of capacity rights and, before the end of the writing-down period, any of the following events occurs—

(a) the rights come to an end without provision for their subsequent renewal or the rights cease altogether to be exercised;

(b) the company sells all those rights or so much of them as it still owns;

(c) the company sells part of those rights and the amount of net proceeds of the sale (in so far as they consist of capital sums) are not less than the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed;

no writing-down allowance shall be made to that company for the chargeable period related to the event or for any subsequent chargeable period.

(2) Where a company incurs ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] on the purchase of capacity rights and, before the end of the writing-down period, either of the following events occurs—

(a) the rights come to an end without provision for their subsequent renewal or the rights cease altogether to be exercised;

(b) the company sells all those rights or so much of them as it still owns, and the amount of the net proceeds of the sale (in so far as they consist of capital sums) are less than the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed;

there shall, subject to and in accordance with this Chapter, be made to that company for the accounting period related to the event an allowance (in this Chapter referred to as a “balancing allowance”) equal to—

(i) if the event is one referred to in paragraph (a), the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed, and

(ii) if the event is one referred to in paragraph (b), the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed less the amount of the net proceeds of the sale.

(3) Where a company which has incurred ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] on the purchase of capacity rights sells all or any part of those rights and the amount of the net proceeds of the sale (in so far as they consist of capital sums) exceeds the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed, if any, there shall, subject to and in accordance with this Chapter, be made on that company for the chargeable period related to the sale a charge (in this Chapter referred to as a “balancing charge”) on an amount equal to—

(a) the excess, or

(b) where the amount of the ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed is nil, the amount of the net proceeds of the sale.

(4) Where a company which has incurred ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] on the purchase of capacity rights sells a part of those rights and subsection (3) does not apply, the amount of any writing-down allowance made in respect of that expenditure for the chargeable period related to the sale or any subsequent chargeable period shall be the amount determined by—

(a) subtracting the amount of the net proceeds of the sale (in so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale, and

(b) dividing the result by the number of complete years of the writing-down period which remained at the beginning of the chargeable period related to the sale,

and so on for any subsequent sales.

(5) References in this section to the amount of any ^[2]>capital expenditure^<[2][2]>qualifying expenditure^<[2] remaining unallowed shall in relation to any event aforesaid be construed as references to the amount of that expenditure less any writing-down allowances made in respect of that expenditure for chargeable periods before the chargeable period related to that event, and less also the amount of the net proceeds of any previous sale by the company which incurred the expenditure of any part of the rights acquired by the expenditure, in so far as those proceeds consist of capital sums.

(6) Notwithstanding subsections (1) to (5)—

(a) no balancing allowance shall be made in respect of any expenditure unless a writing-down allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and

(b) the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.