A balancing allowance is a type of capital allowance which can be given under several of the allowance codes when an asset is disposed of or the business comes to an end.
The rules for balancing allowances differ between the various codes of allowances, and no balancing allowances can arise under the structures and buildings or research and development codes.
Under the plant and machinery code, a balancing allowance can arise in a pool of expenditure only in the final chargeable period for that pool. In the case of the main pool and the special rate pool, the final chargeable period is the period in which the business is permanently discontinued. In the case of a single asset pool the final chargeable period is that in which the business disposes of the asset (or in which another disposal event occurs). The amount of the balancing allowance is the excess, if any, of the tax written down value brought forward from the previous period plus any expenditure allocated to the pool in the final period over any disposal values to be brought into account.