Taxation- Ch6

Plant and machinery

Movable items kept permanently and used for purpose of carrying on business.

Can include-

• Fixtures and fittings

• Motor vehicles

• Furniture

• Computer and office equipment

Tax written down value

Purchase price less total capital allowances claimed to date. As such, there is an opening TWDV and a closing TWDV for the year.

Accelerated capital allowances

For specific energy-efficient equipment as long as the expenditure is above the minimum limit. This would generally be 1,000 e.g. for ICT but it’s 3,000 for lighting and 5,000 for building energy management systems

Conditions for claiming capital allowances

(1) Expenditure is for purpose of carrying on trade/profession

(2) Owned by individual - cannot be leased

(3) Must be in use in the trade at the end of the basis period

Balancing allowance

Arises where asset is sold, ceases to be used, or trade discontinues and the proceeds are less than the closing TWDV

Balancing charge

Arises where asset is sold, ceases to be used, or trade discontinues and the proceeds are greater than the closing TWDV.

• BCs do not arise when the PROCEEDS are below 2,000

• BCs cannot exceed total allowances claimed

• BCs can be deducted against a replacement asset’s cost for capital allowances. If there is an excess, the excess is still due immediately