Capital Allowances Act 2001 section 56

Amount of allowances and charges

Section 56 sets out how to calculate the amount of writing-down allowances, balancing allowances and balancing charges for plant and machinery.

• The standard writing-down allowance is 18% of the excess of available qualifying expenditure (AQE) over total disposal receipts (TDR), rising to 25% for ring fence trade expenditure subject to the supplementary charge
• The allowance is proportionately adjusted if the chargeable period is longer or shorter than a year, or if the qualifying activity was carried on for only part of the period
• A balancing charge arises when TDR exceeds AQE; a balancing allowance arises in the final chargeable period when AQE exceeds TDR
• Different rates apply for small pools, special rate expenditure (6% or 10%) and overseas leasing (10%), and a person may elect to reduce their writing-down allowance to a specified amount