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Writing down allowances are given at a rate of 25% on the value of qualifying expenditure; expenditure on (and receipts on the disposal of) different items of Plant and Machinery are usually pooled. Special rules apply to hire purchase contracts, computer software, cars, short life assets, long life assets, leased assets, ships, the mining and oil industries and fixtures. |
24A.2.1.1.1 Qualifying Activities and Apportionment The Plant and Machinery must be used for a qualifying activity.80 Where the asset is provided or used only partly for a qualifying activity, any first year allowance must be reduced and any writing down allowance must be calculated on the basis that the asset is the subject of a single asset pool.81 These rules represent a sharp contrast to the rules for deductible revenue expenditure, where of course there is no deduction for expenditure is incurred for dual purposes.82 |
Expenditure on a share in plant or machinery qualifies for an allowance.83 |
Further rules restrict both first year and writing down allowances if there is what CAA 2001 calls a partial depreciation subsidy, ie a contribution.84 |
24A.2.1.2 Successions |
The Plant and Machinery provisions in CAA 2001 include special rules allowing the transfer of assets without balancing adjustments on successions to businesses.85 However acquisitions by sales and other relevant transactions between connected persons may also attract certain anti-avoidance rules.86 |
24A.2.1.3 Unusual Acquisitions: Change of Use and Gifts—Market Value? |
The amount of expenditure for which the taxpayer, T, is entitled to claim is not usually a problem where the asset is bought outright. If T brings plant or machinery into use in the trade and had originally bought the asset for other purposes, or if the asset is acquired by way of gift, it used to be the market value of the asset when it was brought into the use of the trade which was taken as the amount of expenditure incurred.87 |
However where the relevant event occurs on or after 21 March 2000 the allowance will be based on the lower of that market value and the (unindexed) original cost.88 So if a world class violinist buys a Stradivarius for his collection and later decides to use it for public performance, the allowance will be given by reference to the original cost; of course the term cost has to be taken in its CAA context so that if the violinist inherited the violin the market value at the time of the inheritance would be used rather than cost. |
Non Residents—The precise treatment of non-residents with taxable activities in the UK |