Capital Allowances Act 2001 section 346

Additional VAT liabilities and initial allowances

Section 346 deals with the entitlement to an initial allowance where an additional VAT liability arises in connection with qualifying enterprise zone expenditure on an industrial building.

• Where qualifying enterprise zone expenditure originally attracted an initial allowance, any additional VAT liability on that expenditure can also qualify for an initial allowance of 100%.
• The additional VAT liability must arise while the building is (or is to be) an industrial building occupied by the relevant interest holder or a qualifying lessee, or used by a qualifying licensee, and within 10 years of the site first being included in the enterprise zone.
• The person claiming the allowance may elect to reduce it to a specified amount, and the allowance is given in the chargeable period in which the additional VAT liability accrues.
• The person who was originally entitled to the initial allowance on the qualifying expenditure does not have to be the same person who incurs the additional VAT liability and claims the new allowance.