Finance Act 2002

Part 5 Calculation of tax written down value

Asset written down on accounting basis

27 (1) For the purposes of this Schedule the tax written down value of an intangible fixed asset to which paragraph 9 applies (writing down on accounting basis) is given by:

TaxCost - Debits + Credits

where—

• Tax Cost is the cost of the asset recognised for tax purposes;

• Debits is the total amount of the debits previously brought into account for tax purposes in respect of the asset under paragraph 9; and

• Credits is the total amount of any credits previously brought into account for tax purposes in respect of the asset under paragraph 15 (revaluation).

(2) Subject to any adjustment required for tax purposes, the cost of the asset recognised for tax purposes is the same as the amount of the expenditure on the asset that is capitalised for accounting purposes.

(3) This paragraph has effect subject to paragraph 29 in the case of an asset that has been the subject of a part realisation.

Asset written down at fixed rate

28 (1) For the purposes of this Schedule the tax written down value of an intangible fixed asset in respect of which an election has been made under paragraph 10 (election for writing down at fixed rate) is given by:

TaxCosts - Debits

where—

• Tax Cost is the cost of the asset recognised for tax purposes; and

• Debits is the total amount of the debits previously brought into account for tax purposes in respect of the asset under paragraph 11 (writing down on fixed-rate basis: calculation).

(2) Subject to any adjustment required for tax purposes, the cost of the asset recognised for tax purposes is the same as the amount of the expenditure on the asset that is capitalised for accounting purposes.

(3) This paragraph has effect subject to paragraph 29 in the case of an asset that has been the subject of a part realisation.

Effect of part realisation of asset

29 (1) The tax written down value of an intangible asset that has been the subject of a part realisation is determined as follows.

(2) The tax written down value of the asset immediately after the part realisation is given by:

where—

• Previous Tax Value is the tax written down value of the asset immediately before the part realisation;

• New Accounting Value is the accounting value of the asset immediately after the part realisation; and

• Previous Accounting Value is the accounting value immediately before the part realisation.

(3) Subsequently, the tax written down value of the asset is determined in accordance with paragraph 27 or 28—

(a) taking the cost of the asset recognised for tax purposes to be the tax written down value given by sub-paragraph (2) above together with the cost recognised for tax purposes of subsequent expenditure on the asset that is capitalised for accounting purposes; and

(b) taking account only of debits and credits brought into account for tax purposes after the part realisation.

(4) On a further part realisation, the preceding provisions of this paragraph apply again.