CA39200 - IBA: Additional VAT: Writing down allowance

A person who has the relevant interest in an industrial building may incur an additional VAT liability in respect of qualifying expenditure. The additional VAT is treated as further qualifying expenditure on the building. You add the additional VAT liability to the residue of qualifying expenditure at the time the additional VAT liability accrues and recalculate the WDA in the same way as you recalculate it when someone buys a used industrial building CA31200. You do this by spreading the new residue of qualifying expenditure over the remainder of the writing down period. The WDA will be higher than before.

Example Terry constructs a workshop for £250,000, brings it into use immediately and claims IBA. The annual WDA is £10,000 (= £250,000 / 25). After 5 years the residue of qualifying expenditure is £200,000 (= £250,000 -  £10,000 x 5) and there are 10 years of the 25-year period from first use of the building left. He changes the use of the workshop and incurs an additional VAT liability of £2,000. His WDA then becomes £10,100 (= [£200,000 + £2,000] / 20)