The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
Assets classified as plant and machinery are usually aggregated into a ‘pool’. Any qualifying expenditure asset is added to the pool and capital allowances are calculated on the pool as a whole. Furthermore, disposals of assets from the pool may lead to balancing allowances and balancing charges arising from that pool.
There are different categories of pool and expenditure on assets is assigned to pools according to the asset and its use. Certain assets must be added to either single asset pools (short-life assets, ships etc) or class pools (special rate expenditure or overseas leasing). Those that do not belong in either of these types of pool fall, by default, into the main pool, also known as the ‘general pool’.
Expenditure on plant and machinery by a company will usually fall directly into the main pool.
Plant and machinery allowances for each accounting period are calculated by applying a fixed percentage to the value of the pool at the end of the accounting period, having taken account of qualifying acquisitions and disposals, on a reducing balance basis.
For accounting periods starting on or after 1 April 2012, the rate of capital allowances for assets in the general pool is 18%. Prior to this, the main rate of writing-down allowances had been 20% since 1 April 2008 and 25% before that.
Where the applicable rate of capital allowances changes part-way through a company’s accounting period, a hybrid rate will need to be applied (see below).
Once the amount of capital allowances has been calculated, they are claimed as a trading deduction in the tax computation. Having deducted the writing down allowances from the value of the pool, the residual balance (the ‘tax written-down value’) is then carried forward to the next accounting period where it
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