BIM46940 - Specific deductions: repairs & renewals: valuation basis

Valuation basis is a variation of renewals allowance which in effect allows the cost of the asset as a revenue expense. Normally valuation basis follows the method used in the accounts. It applies to:

• those assets on which renewals allowance is statutorily available (see BIM46935);
• a stock of spare parts for machinery and plant used as fixed assets;
• consumables such as fuel or stationery; and
• items of machinery or plant with an economic life of two years or less (see, for example BIM67220, on video tapes acquired for hire).

Under valuation basis the assets, as a class, are dealt with in a similar way to stock in a trading account. An account is kept which includes:

• the opening and closing valuation of the assets;
• the cost of additional and replacement assets; and
• the disposal proceeds of any assets.

The balance on the account is allowed as a deduction.

For changes of basis see BIM46950 onwards.