372AS Determination of expenditure incurred in the qualifying period and date expenditure treated as incurred for relief purposes

Summary

The provisions of this section determine whether and to what extent expenditure on the construction of, conversion into, or refurbishment of a qualifying premises or a special qualifying premises is incurred in the qualifying period.

In particular, the section provides that only 75 per cent of such expenditure incurred in the year 2007 and 50 per cent of such expenditure incurred in the period 1 January 2008 to 31 July 2008 is to be regarded as incurred in the qualifying period. These restrictions apply across all the residential schemes covered by Chapter 11. Expenditure that is proper to the year 2006 is not affected. For the purposes of deciding whether or not expenditure is incurred in a period, only the amount of the expenditure that is attributable to work actually carried out in the period is taken into account.

The provisions of the section likewise determine whether and to what extent site development costs in relation to a qualifying premises are incurred in the qualifying period. The section also contains a provision which deals with apportionment of expenditure where the site of a building straddles the boundary of a qualifying urban area or a qualifying town area. Finally, the section determines the date expenditure is treated as incurred for relief purposes.

Details

Expenditure on construction, conversion, or refurbishment

(1) For the purposes of granting rented residential relief to lessors under section 372AP(2) or owner-occupier relief under section 372AR(1), only the amount of the expenditure which is attributable to work actually carried out during the qualifying period is to be treated as incurred during that period in relation to the construction, conversion, or refurbishment of a qualifying premises, or the refurbishment of the special qualifying premises.

(1A) However, any eligible expenditure (lessors) or qualifying expenditure (owner-occupiers) incurred in the year 2007 is to be reduced to 75 per cent of the expenditure incurred when calculating allowances due under section 372AP or section 372AR. For the period 1 January 2008 to 31 July 2008 such expenditure is to be reduced to 50 per cent of the expenditure incurred in that period. These restrictions apply to “qualifying premises” under all schemes and “special qualifying premises” under the general Rental Refurbishment scheme. Expenditure that is proper to the year 2006 is not affected.

(1A)(a) The restrictions are applied by reducing the amount of expenditure incurred in each period to the relevant percentage when determining the amount of expenditure which is to be treated as incurred in the qualifying period. The reduced expenditure is then, automatically, the amount which is taken into account in calculating relief due to purchasers of residential property, as the legislation already compares the “amount of expenditure which is to be treated under section 372AS(1) as having been incurred in the qualifying period” with “relevant cost” (all building costs and site costs) when calculating the “relevant price paid” (see definitions in section 372AP(1)).

(1A)(b) For the purposes of deciding whether or not expenditure is incurred in a period only the amount of the expenditure that is attributable to work actually carried out in the period is taken into account.

The year 2006 is included in the provisions of this subsection to ensure that expenditure is not brought forward into that year to try and avoid the restrictions that apply in relation to the year 2007 and the period 1 January 2008 to 31 July 2008.

Site development costs

Where site development costs are, by virtue of section 372AN(7) or 372AQ(4), included in the expenditure on the construction, conversion or refurbishment of a qualifying premises, then the rule in subsection (1) applies with any necessary modifications to the development costs.

Building partly outside qualifying Urban or Town area

(2A) Apportionment of expenditure, where the site of a building is partly inside and partly outside the boundary of a qualifying urban area or a qualifying town area, is provided for in order to determine the amount of eligible expenditure (see section 372AN) or qualifying expenditure (see section 372AQ) incurred on or in relation to a building. Expenditure is to be apportioned on a floor area basis.

Date expenditure treated as incurred for relief purposes

(3) Apart from deciding when expenditure is incurred for the purposes of subsection (1), expenditure is to be treated as incurred:

• in the case of the construction or the conversion of a qualifying premises under section 372AP (rented residential relief), on the date of its first letting under a qualifying lease,
• in the case of the refurbishment of a qualifying premises or a special qualifying premises under sections 372AP (rented residential relief), on the date the relevant period (within the meaning of that section) starts in relation to the premises, and
• in the case of expenditure incurred on the construction, conversion, or refurbishment of a qualifying premises under section 372AR (owner-occupier relief), on the date on which the premises is first used as a dwelling after the expenditure was actually incurred.

Relevant Date: Finance Act 2019