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Phasing out of industrial and agricultural buildings allowance

The announcement of the plan to phase out Industrial Buildings Allowance (IBA) and Agricultural Buildings Allowance (ABA) came as a major surprise in Budget 2007 and full abolition is due in April 2011

Balancing adjustments.

When a person ceases to have the relevant interest in an industrial building there is a balancing event. Under the old law, this normally gave rise to a balancing adjustment based on any difference between the residue value and the proceeds from the event. Broadly speaking there was a balancing allowance if the asset was sold for less than the value (value = original cost less allowances claimed) and a balancing charge if sold for higher than the value. The new owner was also allowed to continue claiming the allowance (allowance was limited to 25 years after first use).

Balancing adjustments and allowances have been abolished as from 21 March 2007 unless it is in respect of qualifying enterprise zone expenditure or in pursuance of a “relevant pre commencement trade”. In broad terms this means a written contract, made before 21 March 2007.

For agricultural buildings the same rules apply on the acquisition or disposal of a building before 21 March 2007, except there is only a balancing adjustment if there has been an election. If no election is made then the new holder inherits the former holders written down allowance entitlement. For post 21 March 2007 disposals, an election can still be made but no balancing adjustment is made for the vendor and the value (again original cost less allowances claimed) before sale becomes the value after sale.

Annual allowances

The rates of the annual written down allowance are to be reduced from 4% by 1% a year over the period April 2008 to April 2011 when the allowance is to be abolished. When a business has a year end straddling the financial year end the allowance will be time apportioned.

This abolishment will have a detrimental effect on businesses that have invested large sums of money in buildings in recent years. When in April 2011 a large proportion of relief will disappear.

To deal with the change it is a good idea to consult an accountant to ensure you are claiming all allowances available.


The content and advice is for information only. Last updated 26.07.2009.

For up to date information and advice, based on your specific circumstances, please contact us.

We cannot be held responsible for actions taken with reference to the content contained on this website.


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