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Capital Allowances - Periods and Rates

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Capital allowances on plant and machinery

Calculating allowances for accounting periods shorter or longer than 12 months

If your accounting period is shorter or longer than 12 months, there are rules for calculating the amount of capital allowances you are entitled to claim. Please note that the term 'accounting period' is used throughout this guide, but you will see the term 'chargeable period' used in the HM Revenue & Customs Capital Allowances Manual.

Accounting periods of less than a year

If your accounting period is less than 12 months then the amount of allowance you can claim is reduced accordingly.

This does not apply to the temporary 40 per cent allowance for qualifying expenditure incurred in the 12-month period starting 1/6 April 2009 or the 100 per cent first-year allowances (including enhanced capital allowances). In these cases, you can claim the full 40 or 100 per cent for expenditure that that was incurred in a qualifying period or on a qualifying date.

Accounting periods of longer than a year but less than 18 months

If you pay Income Tax and your accounting period is more than 12 months but less than 18 months, then the amount of allowance that you can claim is adjusted accordingly.

If your company pays Corporation Tax, the accounting period can never be more than 12 months.

Accounting periods of longer than 18 months

If you pay Income Tax and your accounting period is longer than 18 months, you must split it into shorter periods and make separate capital allowance calculations for each of them.

The first 12 months will form a period and each subsequent 12-month period, or period of less than 12 months, will form further periods. For example, if the period of account is the 20 months from 1 January 2008 to 31 August 2009, you should split it into 12 months to 31 December 2008 and 8 months to 31 August 2009 and apply the rules above.

Accounting periods that span the date of an allowance change

If your accounting period spans the date when an allowance changed, there are special ways in which you calculate how much allowance you can claim.

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