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industrial building allowance

The current IBA is 4% over a 25 year period. After the 25 years have elapsed the industrial building can be sold without a clawback of the IBA. What would be the situation with a property constructed in the early 1980's when there was an intial allowance of 50% and a yearly WDA of 4%, thus effectively claiming all the allowances in half the time. Would the owner still have to wait 25 years before disposing of the property or can it be sold after the IBA has all been claimed?
Bam

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17th Sep 2003 10:51

beware
The tax life of the building is 25 years and a clawback will occur on a disposal in that period regardless of initial allowances etc.

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18th Sep 2003 16:43

Building sold within 25 years
The relevant legislation is in s314(4) of CAA 2001. This states that there is no balancing adjustment "if the balancing event occurs more than 25 years after the building was first used".

In other words, the fact that the allowances have already been used up does not determine the question of whether there will be a balancing charge. If the sale is within 25 years there will be a balancing adjustment.

Different rules (a 50 year period) apply only if the expenditure was incurred before 6 November 1962! (CAA 2001, schedule 3, para 68).

Barry’s solution is tried and tested and can work well. Indeed, the legislation recognises that the granting of a long lease does not trigger a balancing adjustment – hence the chance to make an election (s290) in certain circumstances. The point was also tested in Woods v R M Mallen (Engineering) Ltd.

If I may be permitted a plug, my book "Industrial Buildings Allowances" is published by CCH later this month. It deals comprehensively with IBAs, with full cross referencing to legislation and Revenue material, plus lots of examples. Price £50 from CCH – 0870 777 2906.

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17th Sep 2003 11:23

Industrial Buildings Allowance
I agree with Phil about the 25 year bit, but it might be worth looking back at the old legislation.

If it is anything like the old agricultural buildings allowances there wasn't the facility for a clawback in the old legislation.

If you can't find a copy of the old legislation i am sure there must be at least one accountant in the country who collects old copies of the various taxes acts etc!

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17th Sep 2003 14:54

Lesser interest
You should be able to avoid a balancing allowance by selling a lesser interest e.g. a very long lease (999years) out of the freehold or a slightly shorter lease than the remaing lease if the property is leasehold

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