Capital Allowances Act 2001 section 350

Additional VAT rebates and balancing adjustments

Section 350 deals with the tax consequences when an additional VAT rebate is received in connection with qualifying expenditure on industrial buildings, and in particular when that rebate exceeds the remaining unallowed expenditure.

• An additional VAT rebate on qualifying expenditure is treated as a balancing event, but no balancing allowance can ever arise from it.
• A balancing charge only arises where the VAT rebate exceeds the residue of qualifying expenditure at the time the rebate accrues, or where there is no residue left at all.
• The balancing charge equals the excess of the rebate over the residue, or the full rebate amount if no residue remains.
• Where a balancing charge is made on the person who originally incurred the qualifying expenditure, the starting expenditure used for future calculations is reduced by the amount of that charge.