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HMRC internal manual

Business Income Manual

Specific deductions: repairs and renewals: valuation basis

Valuation basis is a variation of renewals allowance which in effect allows the cost of the asset as a revenue expense. Normally valuation basis follows the method used in the accounts. It applies to:

  • those assets on which renewals allowance is statutorily available (see BIM46960);
  • a stock of spare parts for machinery and plant used as fixed assets;
  • consumables such as fuel or stationery; and
  • items of plant or machinery with an economic life of two years or less (see, for example, BIM67220, on DVDs or video games acquired for hire).

Under valuation basis the assets, as a class, are dealt with in a similar way to stock in a trading account. An account is kept which includes:

  • the opening and closing valuation of the assets;
  • the cost of additional and replacement assets; and
  • the disposal proceeds of any assets.

The balance on the account is allowed as a deduction.

For changes of basis, see BIM46975.