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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Old rules: forex and accounts drawn up in a foreign currency: pre 2005: accounts wholly in a foreign currency: IBA and other capital allowances

Straight line capital allowances

This guidance applies for accounting periods between 1 October 2002 and 1 January 2005 

Some other capital allowances, such as Industrial Buildings Allowance and Agricultural Building Allowance, are given on a straight-line basis based on the original expenditure that qualifies for the allowance. In the case of Research and Development Allowance, the allowance will normally be 100% of the original expenditure.

Capital allowances of this kind are also computed in the currency of the accounts. The amount of the allowance will be based on the original qualifying expenditure, expressed in the currency of the accounts. If the original expenditure was in a different currency (including sterling), the expenditure should be translated into the reporting currency at the exchange rate for the day on which it was incurred - see CA11750.


Furnish plc draws up accounts to 31 December each year in dollars ($).

On the 1 September 2004, it incurs qualifying expenditure of $1,500,000 on a new factory that will qualify for IBAs.

Assume no first year allowances are due. The writing-down allowance will be 4% of $1,500,000, or $60,000, per annum. The company will, in computing its Case I profit, deduct $20,000 in the year to 31 December 2004, and $60,000 annually thereafter until the year ended 31 December 2029 when it will claim the $40,000 balance of expenditure.

If the factory is sold, the IBA balancing charge or allowance will also be computed in dollars.