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Calculating Capital Allowances

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Capital allowances on plant and machinery

Calculating and claiming plant and machinery allowances

To calculate your capital allowances, you should follow the key steps set out below. Please refer to the other pages in this guide for more information on each type of allowance. You'll also find links at the end of the page to guidance on completing your Company or Self Assessment tax return.

  1. Find out which value to use
  2. Check if you can claim any 100 per cent first-year allowances (some of these are also known as 'enhanced capital allowances').
  3. Check if you can claim the annual investment allowance.
  4. For expenditure incurred in the 12-month period beginning on 1 April 2009 for the purposes of Corporation Tax, and on 6 April 2009 for the purposes of Income Tax, if you have already used up your annual investment allowance or have incurred expenditure you cannot claim for, see if you can claim the temporary 40 per cent first-year allowance. (NB: if you do claim the temporary first-year allowance, don't put the balance of unrelieved expenditure into this year's pool - it has to go into a following year's pool.)
  5. Check your balance of unrelieved expenditure brought forward from the previous year and (where relevant) add on any unrelieved balance not covered by the 40 per cent temporary first-year allowance in an earlier period.
  6. Add to this any balance of new expenditure not covered by your claim for the annual investment allowance or (where relevant) a 100 per cent first-year allowance.
  7. If you sold or disposed of any main rate or special rate pool assets, deduct the appropriate disposal value from the relevant pool total.
  8. If the disposal value exceeds the relevant pool total, record a balancing charge.
  9. If after following the steps above the total value in either the main rate or special rate pool is £1,000 or less, see if you can claim the small pools allowance for that pool.
  10. If the total value is more than £1,000 in either pool apply the relevant rate of writing-down allowance (20 per cent or 10 per cent) to work out your writing-down allowances for that period.
  11. Deduct these allowances from the relevant total in each pool in order to work out the pool values to be carried forward to the next period.
  12. If you sold or disposed of any short-life assets within four years of the end of the accounting period in which you acquired them, or you sold or disposed of any asset in a single asset pool, claim a balancing allowance if the disposal value is less than the unrelieved expenditure in the pool. If the disposal value is more than the unrelieved expenditure in the pool, you will need to record a balancing charge.
  13. If your business is ceasing and the disposal value of the assets in any of your pools is less than the unrelieved expenditure in that pool then you can claim a balancing allowance in respect of the difference.

You can claim your plant and machinery allowances through your Self-Assessment Income Tax return or Corporation Tax return.

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