CA41200 - ABA: Balancing events

CAA01/S381 - S382. FA07/S35

Where the relevant interest in an agricultural building is transferred the person to whom the relevant interest is transferred normally gets the allowances that would have gone to the person who transferred the relevant interest if that person had continued to own it. There is a balancing adjustment if and only if there is a balancing event.

There are no balancing adjustments if the balancing event is a post commencement balancing event.

A post-commencement balancing event is a balancing event that occurs on or after 21 March 2007 apart from an event which occurs before 1 April 2011 in pursuance of a relevant pre- commencement contract.

These are the conditions that have to be satisfied for a contract to be a relevant pre- commencement contract.

• The contract is a contract made in writing before 21 March 2007,
• the contract is unconditional or its conditions were satisfied before 21 March 2007,
• no terms remain to be agreed on or after 21 March 2007, and

the contract is not varied in a significant way on or after 21 March 2007.The events that may be balancing events are:

• the transfer of the relevant interest,
• the destruction of the building, and
• the building ceases altogether to be used (without being demolished or destroyed).

An event is not a balancing event unless an election is made to treat it as one and so there is no balancing adjustment unless an election is made. The election must be made by written notice to the Inland Revenue. It may only be made by a person who is within the charge to tax in the United Kingdom.

If a balancing event is a post-commencement balancing event there is no balancing adjustment even if an election is made.

The election should be made within 2 years of the end of the chargeable period in which the transfer takes place. Where the balancing event is the transfer of the relevant interest the election must be made by the persons entitled to the relevant interest before and after its transfer. The parties may have different chargeable periods. In that case the time limit is within 2 years of the end of the earlier of the two chargeable periods.

A balancing event election for the transfer of the relevant interest may not be made where the transfer is part of a scheme to obtain a tax advantage. A transfer is part of a scheme to obtain a tax advantage if it appears that the sole or main benefit which the parties, or any of the parties, may be expected to obtain from the transfer, or from transactions of which the transfer is one, is the obtaining of an ABA or a greater ABA. A greater ABA is one that is higher than it would normally be.

Where the event is the destruction of an agricultural building the person entitled to the relevant interest immediately before the destruction must make the election. Treat a building that is demolished or gets into a condition where it cannot be used for anything in the same way as a building that is destroyed.