Capital Allowances Act 2001 section 509

Calculation of allowance after sale of relevant interest

Section 509 explains how to recalculate the writing-down allowance for a qualifying dwelling-house after the relevant interest in it has been sold and a balancing adjustment has arisen.

• When the relevant interest in a qualifying dwelling-house is sold and a balancing adjustment is triggered, the writing-down allowance must be recalculated for all subsequent chargeable periods.
• The new allowance is found using the formula: RQE × A ÷ B, where RQE is the residue of qualifying expenditure immediately after the sale, A is the length of the chargeable period, and B is the remaining time from the sale date to the end of the original 25-year writing-down period.
• The 25-year period is measured from the day the dwelling-house was first used, so as each sale occurs later in that window, the denominator B gets smaller, meaning each chargeable period's allowance represents a larger fraction of the remaining expenditure.
• If the relevant interest is sold again on a subsequent occasion, the same recalculation process is repeated, resetting the allowance based on the new residue of qualifying expenditure and the time still remaining in the 25-year window.