Capital Allowances Act 2001 section 347

Additional VAT liabilities and writing-down allowances

Section 347 deals with how an additional VAT liability arising in respect of qualifying expenditure on an industrial building is treated for capital allowances purposes, and how it affects the calculation of writing-down allowances going forward.

• When the holder of the relevant interest incurs an additional VAT liability on qualifying expenditure, that liability is itself treated as qualifying expenditure.
• The residue of qualifying expenditure is increased by the amount of the additional VAT liability at the time the liability accrues.
• The additional VAT liability is treated as a relevant event for the purposes of recalculating writing-down allowances under section 311.
• The effect is that future writing-down allowances are recalculated to spread the increased residue evenly over the remaining years of the allowance period.