Capital Allowances Act 2001 section 488

Balancing allowances

Section 488 sets out when a balancing allowance arises on dredging expenditure upon the permanent discontinuance or sale of a qualifying trade, and the anti-avoidance rules that restrict certain sales from triggering such an allowance.

• A balancing allowance is available when a qualifying trade involving dredging expenditure is permanently discontinued or sold, and the person claiming is the last to carry on that trade before it ceases or is sold.
• The allowance equals the amount by which qualifying dredging expenditure exceeds the total allowances already given in respect of that expenditure, whether to the same or different persons.
• Certain sales are excluded from triggering a balancing allowance — specifically, sales between connected persons, sales involving bodies of persons where one party controls the other (or a third party controls both), and sales whose sole or main purpose is to obtain a tax advantage under the Act (other than under the plant and machinery allowances in Part 2).
• A permanent discontinuance for these purposes does not include events merely deemed to be a discontinuance under section 577(2A) of the Act or section 18 of ITTOIA 2005, so a company ceasing to be within the charge to income tax, for example, will not by itself trigger a balancing allowance.