B3.420 Writing-down allowances

Business tax
Business tax | Commentary

B3.420 Writing-down allowances

Business tax | Commentary

B3.420 Writing-down allowances

The provisions1 for making allowances and charges under the current code are similar to those under the machinery and plant code (see Division B3.3) in that they provide for writing-down allowances on the reducing balance basis. However, there is no provision for pooling expenditure, although a single item of expenditure may involve more than one asset. No initial allowance is available.

A person's entitlement to a writing-down allowance for a chargeable period (for balancing allowances and charges, see B3.421) depends on2:


    (a)     how much of the qualifying expenditure in question is unrelieved qualifying expenditure for that period ('UQE', see below); and


    (b)     the total of any disposal receipts (see below) to be brought into account for that period ('TDR') by reference to the expenditure.

If UQE exceeds TDR, the person is entitled to a writing-down allowance, except where it is provided for the entitlement to be to a balancing allowance (see B3.421)3. He must incur the qualifying expenditure for the purposes of a mineral extraction trade4. However, qualifying expenditure incurred by a person in connection with a mineral extraction trade carried on by him (whether at that time or subsequently) is automatically taken to be incurred for the purposes of that trade5.

For a person subject to income tax, the chargeable period is a period of account. For corporation tax, the chargeable period is an accounting period (see B3.102).

A person's UQE for the chargeable period in which the qualifying expenditure is incurred is the whole of that expenditure unless the

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