Capital Allowances Act 2001 section 386

The residue of qualifying expenditure

Section 386 defines how to calculate the residue of qualifying expenditure on a patent or know-how at any given point in time.

• The residue is calculated as: original qualifying expenditure, plus any balancing charges previously made, minus any allowances previously given
• Balancing charges added back reflect amounts previously clawed back by HMRC, which effectively restore part of the expenditure pool
• Allowances deducted include all writing-down allowances and balancing allowances previously claimed, regardless of who claimed them
• The residue represents the unrelieved balance of expenditure still available for future allowances or for calculating a balancing adjustment on disposal