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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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FCA: Writing down allowances

CAA01/S393J - 393L and S393Q and FA12/SCH39/PARA36

As explained in CA43100, FCA is not available for expenditure incurred on or after

  • 1 April 2013 (for corporation tax purposes) and
  • 6 April 2013 (for income tax purposes).

In addition, the entitlement to claim writing down allowances on any residual expenditure was withdrawn from those dates. Where the chargeable period of a business falls in more than one financial year (corporation tax) or tax year (income tax), the writing down allowance should be apportioned on a time basis between the financial or tax years in order to determine the amount of the writing down allowance that may be set-off against profits.

Writing Down Allowances where chargeable period ends before 1 April 2013 (corporation tax) and before 6 April 2013 (income tax)

The annual rate of WDA is 25% of the qualifying expenditure. A person may claim less than the full amount.

There is a limit on the amount of a WDA. A WDA for a chargeable period cannot be more than the residue of qualifying expenditure at the beginning of that chargeable period. The residue of qualifying expenditure is the qualifying expenditure that has not yet been written off.

This is how you write off qualifying expenditure. You deduct an allowance from the qualifying expenditure at the following times.

  • An initial allowance is written off at the time the flat is first available for letting.
  • Writing down allowance is written off at the end of the chargeable period for which it is made.

A person who has incurred qualifying expenditure on a qualifying flat may claim a WDA if:

  • the person is entitled to the relevant interest in the flat, and
  • the person has not granted a long lease of the flat out of the relevant interest for a capital sum.

A long lease is one that is for more than 50 years. If you need to decide whether a lease exceeds 50 years, use the Schedule A property income rules in CTA09/S244 and S245 ( formerly ICTA88/S38 (1) - (4) and (6)), but ignore any options to renew it.

Writing Down Allowances where chargeable period straddles 1 April 2013 (corporation tax) and 6 April 2013 (income tax)

The operation of the transitional rule can be illustrated using the following example:

  • A company has a 12 month chargeable period of 1 January 2013 to 31 December 2013 (365 days);
  • It originally incurred £10,000 of FCA qualifying expenditure and has residual FCA expenditure of £5,000;
  • But for the withdrawal of FCAs, for the period 1 January 2013 to 31 December 2013 a maximum writing down allowance of £2,500 (£10,000 x 25 per cent) could have been claimed;
  • As a result of the withdrawal, only the period 1 January 2013 to 31 March 2013 (90 days) qualifies for FCA relief;
  • Therefore for its 2013 chargeable period the company would be entitled to a maximum writing down allowance of: 90/365 x £2,500 = £616.44.