CA81600 - Dredging: Balancing allowance

CAA01/S488

A balancing allowance is made when the trade for which qualifying expenditure has been incurred is permanently discontinued or sold. It is made for the chargeable period in which the trade is discontinued or sold.

You calculate the balancing allowance by deducting all the allowances made up to and including the chargeable period before the one in which the trade is permanently discontinued from the qualifying expenditure. You take account of all allowances including any initial allowance made whoever they were made to. Effectively, the balancing allowance gives relief for the qualifying expenditure which has not already been written off and so once there has been a balancing allowance there are no more allowances due.

Exclusions

A deemed permanent discontinuance under ITTOIA05/S18 or CAA01/S577(2A) is not treated as the permanent discontinuance of a trade for dredging allowance purposes. If there is a deemed permanent discontinuance under either of these provisions, a balancing allowance is not due.

Connected person sales and sole or main benefit sales are not treated as sales for dredging allowance purposes. If there is a connected person sale or sole or main benefit sale, a balancing allowance is not due.

A connected person sale is a sale where:

• the seller is a body of persons and the buyer controls the seller, or
• the buyer is a body of persons and the seller controls the buyer, or
• the seller and the buyer are both bodies of persons and another person controls both of them, or
• the buyer and seller are connected persons as defined in S575 CA11630.

A sole or main benefit sale is a sale where it appears that the sole or main benefit which might be expected to accrue to any of the parties is the obtaining of a tax advantage under the Capital Allowance legislation apart from the plant and machinery legislation.