Capital Allowances Act 2001 section 387

Overall limit on balancing charge

Section 387 sets an upper limit on the amount of a balancing charge that can be imposed when a balancing event occurs in relation to mineral extraction allowances.

• A balancing charge arises when a balancing event occurs, such as the disposal of an asset on which mineral extraction allowances have been claimed.
• The balancing charge on any person cannot exceed the total mineral extraction allowances previously given to that person in respect of the same qualifying expenditure.
• Only allowances for chargeable periods ending before the period in which the balancing event occurs are taken into account when calculating the cap.
• This rule ensures that a person is never required to pay back more in balancing charges than the total tax relief they have received through allowances on that expenditure.