Capital allowances Ready Reckoner now available
Why is this Ready Reckoner being provided?
Because the rate of Writing Down Allowance (WDA) for business expenditure on plant and machinery changed from April 2008:
- from 25 to 20 per cent for general plant and machinery
- from 6 to 10 per cent for long-life plant and machinery
These changes were effective from:
- 1 April 2008 for companies
- 6 April 2008 for the self-employed, or people in partnerships
Transitional, hybrid rate
In order to ensure a fair and equitable transition to the new rates, a business whose chargeable period (that is, its period of account or accounting period) spanned the relevant change date, must use a hybrid rate of WDA for that transitional period only.
Further background
What is the hybrid rate?
The new Ready Reckoner will make this calculation for any business affected.
But for background information, the hybrid rate is arrived at by calculating:
- the rate for the portion of the chargeable period falling before the change date
- the rate for the portion falling after that date
- adding the two rates together
For example, if a company’s chargeable period began on 1 January 2008 and ended on 31 December 2008, 91 days would fall before the change date (1 April 2008), and 275 days would fall after that date. The calculation of the hybrid rate for general plant and machinery would be as follows:
91/366 x 25% = 6.22%
Plus, 275/366 x 20% = 15.03%
Hybrid rate for transitional period = 21.25%
But to make businesses’ tax affairs easier to manage, they will not have to make these calculations. The Ready Reckoner will make them for any business affected.
The Ready Reckoner will similarly calculate the hybrid rate of WDA for any business with long-life asset* expenditure.
(*Long-life assets are assets with a useful economic life, when new, of 25 years or more. However, this rate only applies to businesses that have spent more than £100,000 on long-life assets in a chargeable period of a year.)
How to use the new Ready Reckoner
The Ready Reckoner tool includes very simple instructions which tell the user what information to input. Essentially, the user is asked to insert the dates of the transitional chargeable period and the type of WDA for which a hybrid rate is needed.
The Ready Reckoner will respond with an appropriate message if a user inadvertently inputs incorrect information, such as dates for a period that is not, in fact, a transitional chargeable period.
Keeping you informed
We will use this page to tell you about any important amendments to the Ready Reckoner or changes to the service levels. The current version of the Ready Reckoner is Version 1.00.1426. This version was released on 4 December 2008.
Tell us what you think
We value your feedback. Please use our feedback form to tell us about your experiences in using the Ready Reckoner and to pass on any suggestions you have for improving it.
Using the Ready Reckoner
You can access the hybrid rate Ready Reckoner page from the link below.
