HC Deb 13 July 1982 vol 27 cc993-5

4.—(1) Where any capital expenditure has been incurred on the construction of such a building as is referred to in paragraph 1(1) above and any of the following events occur while a dwelling-house comprised in that building is a qualifying dwelling-house, that is to say—

  1. (a) the relevant interest in the dwelling-house is sold, or
  2. (b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled to it acquiring the interest which is reversionary on it, or
  3. (c) the dwelling-house is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,
then, subject to sub-paragraph (2) below, for the chargeable period related to that event an allowance or charge (in this Schedule referred to as a "balancing allowance" or a "balancing charge") shall, in the circumstances mentioned below, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs.

(2) No balancing allowance or balancing charge shall be made by reason of any event occurring more than twenty-five years after the dwelling-house was first used.

(3) Subject to paragraph 5 below, where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount of it shall be the amount of that residue or, as the case may be, of the excess of that residue over those moneys.

(4) Subject to paragraph 5 below, if the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the residue is nil, to those moneys.

(5) The provision of section 78 of and Schedule 7 to the Capital Allowance Act 1968 (special provisions as to certain sales) apply for the purposes of this Schedule as they apply in relation to the sale of an industrial building and as if—

  1. (a) any reference in these provisions to Part I of that Act to this Schedule; and
  2. (b) for the words in sub-paragraph (2)(a) of paragraph 4 of that Schedule following "the case of" there were substituted the words "a qualifying dwelling-house, the residue of the expenditure immediately before the sale, computed in accordance with paragraph 7 of Schedule 994 (Capital allowances for dwelling-houses let on assured tenancies) to the Finance Act 1982"; and
  3. (c) for paragraphs (a) and (b) of sub-paragraph (3) of paragraph 4 of that Schedule there were substituted the words "both the seller and the buyer are at the time of the sale approved bodies, as defined in section 56(4) of the Housing Act 1980".

(6) For the purposes of this Schedule, any transfer of the relevant interest in a dwelling-house, otherwise than by way of sale, shall be treated as a sale of that interest for a price other than that which it would have fetched if sold on the open market; and if Schedule 7 to the Capital Allowances Act 1968 would not, apart from this sub-paragraph have effect in relation to a transfer treated as a sale by virtue of this sub-paragraph, that Schedule shall have effect in relation to it as if it were a sale falling within paragraph 1(1)(a) of that Schedule.

(7) Notwithstanding anything in the preceding provisons of this paragraph (or in paragraph 5 below), in no case shall the amount on which a balancing charge is made on any person in respect of any expenditure on the construction of a dwelling-house comprised in a building exceed the amount of the initial allowance, if any, made to him in respect of the expenditure appropriate to that dwelling-house together with the amount of any writing-down allowances made to him in respect of that expenditure for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis period ends on or before that date.

5.—(1) If, in a case where paragraph 4(1) above applies, a dwelling-house which had been a qualifying dwelling-house was not, for any part of the relevant period, such a dwelling-house, the provisions of this paragraph shall have effect instead of subparagraphs (3) and (4) of paragraph 4 above.

(2) Subject to sub-paragraph (4) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure appropriate to the dwelling-house, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.

(3) Subject to sub-paragraph (4) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure appropriate to the dwelling-house, then—

  1. (a) if the adjusted net cost of the dwelling-house exceeds the allowances given, a balancing allowance shall be made and the amount thereof shall be an amount equal to the excess;
  2. (b) if the adjusted net cost of the dwelling-house is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall.

(4) No balancing charge or allowance shall be made under this paragraph on the occasion of a sale if, by virtue of paragraph 4 of Schedule 7 to the Capital Allowances Act 1968, as applied by paragraph 4(5) above, the dwelling-house is treated as having been sold for a sum equal to the residue of the expenditure before the sale.

(5) In this paragraph— the relevant period" means the period beginning at the time when the dwelling-house was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge, except that where there has been a sale of the dwelling-house after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale; the capital expenditure" means—

  1. (a) where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of paragraph 8 below deemed to have been incurred) on the construction of the dwelling-house;
  2. (b) where the person to or on whom the balancing allowance or balancing charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure the residue of that expenditure at the beginning of the relevant period,
together (in either case) with any amount to be added to the residue of that expenditure by virtue of paragraph 7(9) below; the allowances given" means the allowance referred to in paragraph 4(7) above; the adjusted net cost" means—
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  1. (a) where there are no sale, insurance, salvage or compensation moneys, the capital expenditure appropriate to the dwelling-house; and
  2. (b) where those moneys are less than that expenditure, the amount by which they are less, reduced (in either case) in the proportion that the part of the aggregate of the parts, of the relevant period for which the building is a qualifying dwelling-house bears to the whole of that period.

6.—(1) If a dwelling-house ceases to be a qualifying dwelling-house otherwise than by reason of a sale or transfer of the relevant interest in it, that relevant interest shall be treated for the purposes of this Schedule as having been sold, at the time the dwelling-house ceases to be a qualifying dwelling-house, for the price which it would have fetched if sold in the open market.

(2) For the purposes of this Schedule, a dwelling-house shall not be regarded as ceasing altogether to be used by reason that it falls temporarily out of use, and where, immediately before any period of temporary disuse, it is a qualifying dwelling-house, it shall be regarded as continuing to be a qualifying dwelling-house during the period of temporary disuse.