Capital Allowances Act 2001 section 96

Calculation of writing-down allowances [CAA 2001 Sch 3 para 96]

Section 96 sets out the formula for calculating writing-down allowances on qualifying patent expenditure incurred before 1 April 1986, and notes the circumstances in which the basic calculation may be modified.

• The writing-down allowance for an item of qualifying expenditure is calculated using the formula E × C/W, where E is the qualifying expenditure, C is the portion of the chargeable period that falls within the writing-down period, and W is the total length of the writing-down period.
• The effect of the formula is to spread the qualifying expenditure evenly over the writing-down period, with a proportionate allowance given for any chargeable period that only partly overlaps with that period.
• The basic calculation is subject to rules on cessation of writing-down allowances, which can prevent any further allowance being given in certain circumstances.
• The basic calculation is also subject to rules on reduced writing-down allowances, which can restrict the amount of the allowance below the figure produced by the formula.