Capital Allowances Act 2001 section 66A

Persons leaving cash basis

Section 66A deals with the transitional rules for claiming capital allowances on plant and machinery when a business moves from the cash basis of accounting to the accruals basis.

• When a business leaves the cash basis, any past expenditure on plant and machinery that would have qualified for capital allowances is split into a "relieved portion" (already deducted under the cash basis) and an "unrelieved portion" (not yet relieved)
• The unrelieved portion is treated as if it were newly incurred expenditure in the period of leaving, potentially qualifying for annual investment allowance or first-year allowances
• The full amount of the original expenditure must be allocated to the appropriate capital allowances pool, but the pool balance is then reduced by the relieved portion to avoid giving double tax relief
• Any future disposal of the asset will be treated as a disposal of qualifying expenditure, ensuring that disposal proceeds are properly brought into account for balancing charge purposes