CA23171 - Plant and Machinery Allowance (PMA): First Year Allowance (FYA): Super-Deduction and Special Rate (SR) Allowance: Disposal of assets on which super-deduction has been claimed – balancing charge in chargeable periods commencing before 1 April 2023

FA21/S12(6)-(8)

CA23169 describes how to compute the ‘relevant proportion’, and therefore the balancing charge, which arises when an asset on which a super-deduction has been claimed is subject to a disposal event on or after 1 April 2021.

The balancing charge arises in the chargeable period in which the disposal event occurs. There is guidance on disposal events at CA23240.

For disposal events within chargeable periods that commenced on or after 1 April 2021 and before 1 April 2023, the balancing charge is the ‘relevant proportion’ of the disposal value of the plant or machinery multiplied by the ‘relevant factor’.

The disposal value is determined in the normal way. There is guidance on disposal values at CA23250.

Relevant factor for chargeable periods ending before 1 April 2023

If, in addition to commencing on or after 1 April 2021 and before 1 April 2023, the chargeable period ends before 1 April 2023, the relevant factor is 1.3.

Example – disposal in a chargeable period ending before 1 April 2023

Delta Ltd has a chargeable period ended 31 March. In the chargeable period ending 31 March 2022, the company incurs expenditure of £100,000 on a food processing machine and claims a super-deduction of £130,000. In the chargeable period ending 31 March 2023, the company decides it no longer requires the machine, so it sells it for £100,000.

The balancing charge the company must add to its taxable profits in respect of this disposal is calculated using the following steps:

  1. Calculate the relevant proportion, as outlined on CA23169: divide the £100,000 of relevant super-deduction expenditure by the £100,000 of total relevant expenditure to give a relevant proportion of 1.
  2. Multiply the disposal value by the calculated relevant proportion: multiply the £100,000 disposal value by 1, the relevant proportion, to give £100,000.
  3. As the disposal event occurred in a chargeable period ending before 1 April 2023, multiply the result at step 2 by the relevant factor: multiply the £100,000 by 1.3, the relevant factor, to give a balancing charge of £130,000.

Relevant factor for chargeable periods ending on or after 1 April 2023

If the chargeable period ends on or after 1 April 2023, you calculate the relevant factor using the following steps:

  1. Divide the number of days in the period before 1 April 2023 by the total number of days in that period.
  2. Multiply that amount by 0.3.
  3. Add 1 to the result.

Example – disposal in a chargeable period ending on or after 1 April 2023

For a 12-month chargeable period ending 31 December 2023, there are 90 days in the period before 1 April 2023 and 365 days in that period. Following the above steps, the relevant factor will be 0.3 × (90 ÷ 365) + 1.

The balancing charge is the product of the relevant proportion and the computed relevant factor. If the relevant proportion in this chargeable period is £100,000, the balancing charge will be £107,397.