What does section 510 of the Capital Allowances Act 2001 do?

Section 510 caps the writing-down allowance for any chargeable period in respect of a dwelling-house at the residue of qualifying expenditure attributable to that dwelling-house. This ensures total allowances claimed over the life of the asset never exceed the original qualifying expenditure incurred on the dwelling-house.

How is the residue of qualifying expenditure determined under section 510?

The residue is the amount of original qualifying expenditure not yet written off through previous allowances. It is calculated immediately before the current period's writing-down allowance is written off at the end of that chargeable period, providing the ceiling for the allowance that may be claimed.

What happens when the residue of qualifying expenditure reaches nil?

Once the residue of qualifying expenditure attributable to a dwelling-house reaches nil, no further writing-down allowances are available for that dwelling-house. This prevents any claim exceeding the total original qualifying expenditure and ensures the allowance regime concludes when the expenditure is fully relieved.

Can you give a practical example of how section 510 limits writing-down allowances?

If a landlord incurs £10,000 qualifying expenditure and claims 25% writing-down allowances on a reducing balance, year one yields £2,500 (residue £7,500), year two yields £1,875 (residue £5,625), and so on. Each year's allowance is limited to the remaining residue, ensuring total claims never exceed £10,000.

Capital Allowances Act 2001 section 510

Allowance limited to residue of qualifying expenditure attributable to dwelling-house

Section 510 ensures that writing-down allowances for a dwelling-house cannot exceed the remaining qualifying expenditure attributable to that dwelling-house.

The writing-down allowance for any chargeable period in respect of a dwelling-house is capped at the residue of qualifying expenditure attributable to that dwelling-house.
The residue is calculated immediately before the writing-down allowance is written off at the end of the chargeable period.
This prevents total allowances claimed from exceeding the original qualifying expenditure incurred on the dwelling-house.
Once the residue of qualifying expenditure reaches nil, no further writing-down allowances are available for that dwelling-house.

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