CA43450 - FCA: Balancing adjustments
CAA01/S393M - S393P and CAA01/S573
There is a balancing adjustment if there is a balancing event
within 7 years of the time when the flat was first suitable for
letting. A balancing adjustment is either a balancing allowance or
balancing charge. If there is more than one balancing event there
is only a balancing adjustment on the first one.
These are the balancing events and the proceeds to be brought
into account.
| Balancing Event | Proceeds from Event |
| Transfer of relevant interest | Net proceeds of sale if
the relevant interest is sold
Market value if the transfer is other than by way of sale |
| Grant of a long lease out the relevant interest for a capital sum | The capital sum paid for the grant or, if less than the commercial premium, the commercial premium |
| The coming to an end of a lease where a person entitled to the lease and a person entitled to any superior interest are connected persons | The market value of the relevant interest at the time of the event |
| Death of the person who incurred the qualifying expenditure | The residue of qualifying expenditure immediately before death |
| Demolition or destruction of the flat | The net amount received plus any insurance or compensation receipts |
| Flat ceases to be a qualifying flat, for example because it is let to a person connected with the person who incurred the qualifying expenditure | The market value of the relevant interest at the time of the event |
There is a balancing allowance if:
- there are no proceeds from the balancing event, or
- the proceeds are less than the residue of qualifying expenditure immediately before the event.
The balancing allowance is the difference between the proceeds
(if any) and the residue of unrelieved qualifying expenditure.
There is a
balancing charge where the proceeds are greater
than the residue of qualifying expenditure immediately before the
event. The amount of the balancing charge is:
- the difference between the proceeds and the residue of qualifying expenditure, or
- the proceeds if the residue is nil.
A balancing charge made on a person cannot be more than the allowances (initial and writing down) made to the person in respect of the flat.
