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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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Plant & Machinery Allowances (PMA): Long-life assets: Transitional provisions including hybrid rate

Where the chargeable period of a business begins on 1 April 2008 (corporation tax) or 6 April 2008 (income tax) any unrelieved expenditure in the long life asset pool immediately before those dates will be transferred to the new special rate pool and will qualify for 10 % writing down allowances. However when the chargeable period of a business spans those dates (1/6 April 2008) transitional provisions apply as follows:

  • no new expenditure incurred on or after 1 (or 6) April 2008 is to be allocated to the long life asset pool- instead it is allocated to the special rate pool;
  • a hybrid rate will have effect for existing expenditure in the long life asset pool for the whole of the transitional chargeable period; and
  • at the start of the next chargeable period, all unrelieved expenditure in the long life asset pool will be transferred to the special rate pool.

 

Hybrid Rate

For a business whose chargeable period spans 1 April 2008 (corporation tax) or 6 April 2008 (income tax) a hybrid rate will have effect for unrelieved expenditure in any pool, including single asset pools. There are two hybrid rates:

  • one for expenditure that previously qualified for the 25% WDA (see CA23330 ) and
  • the other for expenditure that qualified for the 6% WDA.

The hybrid rate is arrived at by calculation the proportion of a chargeable period falling before the change date and the corresponding proportion falling after the change date.

The relevant legislation (FA08/S80 (10) & S83 (2)) specifically requires that apportionments must be made on the basis of days in all cases and is rounded up to two decimal places.

Example

If a company’s chargeable period began on 1 January 2008 and ended on 31 December 2008 part of the period falls before the date of the change (on 1 April 2008) and part falls after that date.

The calculation of the hybrid rate on the long life assets would be as follows:

91/366 x 6%                                        = 1.4917%

Plus 275/366 x 10%                              = 7.5136%

The Hybrid Rate for Transitional Period    = 9.01%