Capital Allowances Act 2001

Capital Allowances Act 2001

2001 CHAPTER 2

Commentary on Sections

Glossary

Part 2: Plant and machinery allowances

Chapter 11: Overseas leasing

Section 111: Excess allowances: standard recovery mechanism

462. This section is based on section 46(1) to (4) and (8) of CAA 1990. It recovers allowances if:

• expenditure is allocated to a pool with writing-down allowances at 25%; but

• it becomes clear in a later chargeable period that this Chapter applies to that expenditure.

463. The section broadly withdraws the difference between:

• any first-year allowances plus writing-down allowances at 25%; and

• allowances at 10%.

464. It does so by imposing a balancing charge and requiring a disposal value. In broad terms:

• the balancing allowance recovers the excess of allowances made over what would have been made at 10%; and

• the disposal value takes out of the pool the residue of qualifying expenditure in the pool on which future allowances would otherwise be made at 25%.

465. But in the next chargeable period it allocates to an appropriate pool the total of the allowances withdrawn and the expenditure taken out of the original pool. The net effect of this is broadly that the expenditure is still relieved in full but at a slower rate – as it would have been if the 10% rate had applied from the outset.