Capital Allowances Act 2001 section 337

Writing off or increase of expenditure where balancing adjustment made

Section 337 deals with how the residue of qualifying expenditure on a building is adjusted when a balancing allowance or balancing charge arises on the sale of the relevant interest.

• When a balancing allowance is made on sale, the excess of the residue of qualifying expenditure over the net sale proceeds is written off at the time of sale.
• When a balancing charge is made on sale, the residue of qualifying expenditure is increased by the amount of the charge at the time of sale.
• A special cap applies where the balancing charge arises because the building was not an industrial building throughout the ownership period — in that case, the residue after sale cannot exceed the net sale proceeds.
• These adjustments ensure the residue of qualifying expenditure carried forward to the buyer correctly reflects the balancing adjustment that has been made on the seller.