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HMRC internal manual

Business Income Manual

DVD and blu-ray disc traders: renewals allowance

S68 Income Tax (Trading and Other Income) Act 2005, S68 Corporation Tax Act 2009

The statutory renewals allowance may be claimed on the DVDs and blu-ray discs as an alternative to capital allowances (see BIM67205). However, as no deduction is given for the initial expenditure, only on the net cost of replacing the items, the renewals allowance may be disadvantageous to the trader. However, there is an advantage, which is that if the statutory renewals allowance is adopted there is no need for a valuation of the DVDs and blu-ray discs etc held at the end of the year.

For guidance on the statutory renewals basis, see BIM46960.

In view of the disadvantage mentioned above the valuation basis is normally preferred (see BIM67220).

However, if the trader does adopt the renewals allowance, a broad view should be taken when considering what is a replacement for the purposes of the renewals allowance. For instance, you can accept that that a children’s cartoon could be a replacement for a thriller. Where there is no improvement the amount to be allowed is the cost of the new DVD/blu-ray disc less the proceeds from the sale of the item it replaces.