What are postponed capital allowances under section 212Q of the Capital Allowances Act 2001?

Postponed capital allowances arise when there is unrelieved qualifying expenditure in a capital allowances pool at the time of a qualifying change. Specifically, they exist where amount 2 in section 212K(3) is greater than nil, representing expenditure allocated to a pool but not yet claimed as allowances.

How does section 212Q restrict sideways loss relief on postponed capital allowances?

Losses from postponed capital allowances can only be set against profits of qualifying activities that company C or a member of partnership P was already carrying on at the start of the relevant day. The relief is further capped at the amount that would have been available had the qualifying change never taken place.

Why must the acquired activity be treated as a separate trade under section 212Q?

Section 212Q requires company C to treat the acquired qualifying activity as a separate trade solely for the purpose of claiming allowances on postponed qualifying expenditure. This ring-fences the resulting allowances and prevents them from being absorbed into C's wider trading results, ensuring losses remain restricted.

How does section 212Q limit group relief for losses from postponed capital allowances?

Group relief and group relief for carried-forward losses under Parts 5 and 5A of the Corporation Tax Act 2010 are only available for losses from postponed allowances if such relief would have been available without the qualifying change. Even then, the amount is capped at what would have applied in those circumstances.

Capital Allowances Act 2001 section 212Q

When there are postponed capital allowances

Section 212Q restricts how losses arising from postponed capital allowances can be used after a qualifying change, including limits on sideways loss relief and group relief.

The section applies where company C or partnership P has postponed capital allowances (i.e. where amount 2 in section 212K(3) is not nil)
Where C takes over a qualifying activity following the change, that activity is treated as a separate trade for the purpose of claiming allowances on the postponed expenditure
Losses from these postponed allowances can only be set off against profits of activities already carried on by C or a member of P at the start of the relevant day, and only up to the amount that would have been available without the qualifying change
Group relief (including group relief for carried-forward losses) is similarly restricted — it is only available if it would have been available without the qualifying change, and capped at the amount that would have applied in those circumstances

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