Section 447 | Additional VAT liability treated as additional expenditure etc.

(1)If a person—

(a)has incurred qualifying expenditure (“the original expenditure”), and

(b)incurs an additional VAT liability in respect of that expenditure,

the liability is to be treated as capital expenditure incurred on the same research and development as the original expenditure.

(2)But subsection (1) does not apply if by the time the liability is incurred—

(a)the person who incurred the original expenditure has ceased to own the asset representing that expenditure, or

(b)that asset has been demolished or destroyed.

(3)Any allowance arising as a result of this section is available for—

(a)the chargeable period in which the liability accrues, or

(b)if the liability accrued before the chargeable period in which the relevant trade is set up and commenced, that chargeable period,

rather than for the relevant chargeable period specified in section 441(2).