CA45900 - Business Premises Renovation Allowance: proceeds from balancing events, calculation of balancing adjustment

CAA01/ S360O and s360P

These are the proceeds from the various balancing events.

Balancing eventProceeds
  1. The sale of the relevant interest
The net proceeds of sale
  1. The grant of a long lease out of the relevant interest
The greater of
  • the capital sum paid for the grant of the lease, and
  • the commercial premium.
  1. The coming to an end of a lease where a person entitled to the lease is connected with a person entitled to a superior interest
The market value of the relevant interest in the qualifying building at the time of the event
  1. The death of the person who incurred the qualifying expenditure
The residue of qualifying expenditure immediately before the death
  1. The demolition or destruction of the qualifying building
The net amount received for the remains together with any insurance monies received in respect of the demolition or destruction and any other capital compensation received
  1. The qualifying building ceases to be qualifying business premises
The market value of the relevant interest at the time of the event


This is how you calculate a balancing allowance or balancing charge.

Compare the proceeds from the balancing event with the residue of qualifying expenditure immediately before the balancing event.

There is a balancing allowance if there are no proceeds or if the residue is more than the proceeds. The amount of the balancing allowance is

  • the residue if there are no proceeds
  • the difference if the proceeds are less than the residue.

There is a balancing charge if the residue is less than the proceeds. The amount of the balancing charge is

  • the proceeds if the residue is nil
  • the difference otherwise.

There is a restriction on the amount of a balancing charge. A balancing charge may not be more than the initial allowances made to the person plus WDAs made for chargeable periods ending on or before the date of the balancing event.

Example

Maureen incurs qualifying expenditure of £100,000 and claims 100% initial allowance so the residue is nil. She sells the building for £120,000 3 years later. The balancing charge is the proceeds, £120,000 but it is restricted to £100,000, the allowances made.