Renewals allowance (see
BIM46935) may be claimed although it may
be disadvantageous to the taxpayer because it only allows a
deduction for the net cost of replacement. However, if it is
adopted there is no need for a valuation of the tapes held at the
end of the year.
In view of the disadvantages set out at BIM46935, which
should be made clear to the trader before the renewals basis is
accepted; the valuation basis is normally preferred.
A broad view should be taken when considering what is a
replacement for the purposes of the renewals allowance. For
instance they can accept that that a children’s cartoon could
be a replacement for a thriller. Where there is no improvement the
amount to be allowed is the cost of the new video less the proceeds
from the sale of the video it replaces.
