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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: example: adjustments for private use

The 40% or 50% FYAs were withdrawn in respect of expenditure incurred on or after 6 April 2008 (for IT purposes) and were replaced by the Annual Investment Allowance (AIA) (see EIM36605).

This example illustrates adjustments for private use. It also shows that assets which are used privately as well as for business are not pooled, either with each other or with assets used wholly for business (see EIM36660).

A travelling salesman working from home takes up employment in Newcastle on 6 April 2008 and is obliged immediately to purchase a word processor (cost £2,500) for use in the performance of the duties. The word processor is used 95 per cent of the time for business.

In June 2009, as a result of a new sales campaign, the salesman is required to buy a copier costing £600. It is accepted that the copier is used wholly for business. He elects not to claim Annual Investment Allowance.

Writing down allowances are claimed as follows.

  Word processor Copier Total allowances  
         
  £   £ £
2008/09        
Cost 2,500      
Less WDA(20%) 500 (x 95% = 476)   475
Residual value 2000      
2009/10        
Cost     600  
Less WDA(20%) 400 (x 95% = 380) 120 500
Residual value 1,600   480  

Note that:

  • the residual value to carry forward is calculated by deducting the full 25% writing down allowance (or first year allowance at the appropriate rate), before making any adjustment for private use.
  • Please also see the guidance at EIM36695 relating to small pools allowance.