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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. »Ê¹ÚÌåÓýapp 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.

Example

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. »Ê¹ÚÌåÓýapp writing-down allowance will be 4% of $1,500,000, or $60,000, per annum. »Ê¹ÚÌåÓýapp 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.