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HMRC internal manual

Employment Income Manual

Deductions from earnings: capital allowances: calculation of the allowances due: writing down allowances: the amount on which the allowance is calculated

Section 57 CAA 2001

The expenditure qualifying for a writing down allowance in any year of assessment will usually consist of:

  • the actual amount spent on plant and machinery during the year (less any amounts on which Annual Investment Allowance or first year allowance is being claimed (see EIM36605 and EIM36610)) and
  • the residual value of any expenditure brought forward from earlier years.

For an illustration of this see example EIM36925.

  • With effect from 6 April 2008, there is also a small pools allowance where the balance of the main pool or special rate pool before deducting WDA is £1,000 or less (see EIM36695)

Exceptions to this rule apply when:

  • Machinery or plant which is acquired under a hire purchase contract is brought into use by the employee. The qualifying expenditure is the total amount payable under the hire purchase contract less any ‘interest’ payable under it (see CA11800). For the treatment of the ‘interest’ on a car purchase see EIM32860.
  • Machinery or plant which already belongs to the employee is brought into use in performing the duties of the office or employment for the first time. The expense incurred should be taken as the open market value at the time it is brought into such use. An Inspector should determine the open market value in these cases.
  • A number of items of machinery or plant are purchased. If the items are used solely for work the legislation provides for them to be dealt with in a ‘pool’. This avoids having to calculate individual writing down allowances or balancing adjustments on each item. But not all vehicles can be pooled. The position regarding vehicles is complex but can be summarised as follows:

    • commercial vehicles, cars costing £12,000 or less, and certain hire cars are included in the pool along with other assets. Before 2000/01, cars costing £12,000 or less had to go into a separate ‘cheap car’ pool.
    • cars costing over £12,000 (other than certain hire cars) are not pooled.

Pooling does not apply to assets which are used partly for non-business purposes. For that reason, it is unlikely to occur very often in relation to employees and office holders. When it does, submit the case to an Inspector.

Remember that employees cannot claim capital allowances for cars, vans, motor cycles or bicycles after 5 April 2002 (see EIM36520).