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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Deductions from earnings: capital allowances: calculation of the allowances due: balancing allowances and charges: how they are calculated

Section 57 CAA 2001The balancing adjustment is made by reference to the ‘disposal value’ of the item concerned (see

EIM36690). In a straightforward case where the plant is the only item on which the employee has claimed allowances in the past and it is sold for its market value, the balancing adjustment for the year of sale will be
* a balancing charge on the amount by which the sale price is greater than the residual value brought forward from the previous year of assessment (but limited if necessary so that the sale price used in the calculation does not exceed the original cost or the qualifying expense in the year allowances were first claimed) or * a balancing allowance on the amount by which the sale price is less than the residual value brought forward from the previous year of assessment.Both balancing charges and allowances have to be adjusted to take private use into account in accordance with

EIM36570, see example EIM36930.

Where the extent of private use has varied over the life of the item an average fraction has to be used.

For 2001/02 and earlier years there are some special rules for dealing with capital allowances and balancing allowances on motor vehicles and bicycles, see SE36970 and example SE36935 . Remember that employees cannot claim capital allowances (including balancing allowances) for cars, vans, motor cycles or bicycles after 5 April 2002 (see EIM36520).