CA23790 - Plant & Machinery Allowances (PMA): Long-life assets: Application of legislation to modern printing equipment
Equipment used in the printing industry used to have a long expected economic life. This is evidenced by a strong second hand market in printing presses, and by the availability in that market of a significant amount of printing equipment manufactured in the 1970's and early 1980's.
However, changes in practices and advances in technology in recent years mean that equipment is more likely to become obsolete in a shorter time than it used to. Following representations from the printing industry, we have reviewed the way in which we apply the capital allowances rules to modern printing equipment.
This is how the legislation should apply to modern printing equipment.
FA2011 reduced the rates of WDAs in the main and special rate pools from 20% and 10% to 18% and 8% respectively from 1 April 2012 (CT) and 6 April 2012 (IT).
The approach to modern printing equipment
We have had discussions with representatives of the printing industry and have looked at trends in the second hand market for printing equipment. You should deal with each case on its own particular facts, but unless there are exceptional circumstances you should accept that modern printing equipment purchased new and unused is unlikely to have an expected useful economic life of 25 years or longer. This means that it will not be a long-life asset.
Purchase of second-hand printing equipment
Where second-hand printing equipment is acquired the treatment will depend on whether or not the seller claimed capital allowances on it. If it is acquired from a person who has claimed capital allowances on the asset the buyer will obtain the same treatment as the seller. If the seller treated the asset as a long-life asset the buyer will obtain relief at the rate for the special rate pool. If the seller received writing down allowances in the main pool the buyer will also receive them at that rate.
If the asset is acquired from a dealer in second-hand equipment, or another person who has not claimed capital allowances on the particular asset, then the general approach outlined above will be applied. A key additional factor to those outlined above will be the age of the equipment on acquisition.
Equipment covered by this guidance
Printing equipment broadly falls into three categories:
- printing presses, and
- finishing equipment.
Pre-press is a distinct function in the printing process. Pre-press equipment is used to prepare the text and images for imposition onto an image-carrying device, usually a printing plate that is then fitted to the printing press. Examples might be proofing devices, image setters and computer to plate devices. Advances in digital technology mean that the printing plate is becoming obsolete. Products that enable images to be sent electronically to a digital or quasi-digital press are coming onto the market. Rapid technological advances mean that pre press products on the market today are becoming obsolescent in an increasingly short time.
Printing presses are the means by which the images are transposed onto paper or some other medium. The largest sector of this market is for sheet-fed offset presses. Other types of presses include heat and cold set “web offset” used for magazine and long run commercial print; “flexographic” used for packaging and labels; “gravure” used for long run magazines and packaging; and “digital” used for short run colour and variable data printing.
Finishing equipment is used for such things as folding, cutting and binding the printed product. Although very often a stand-alone investment, finishing equipment is increasingly becoming computer controlled and more productive and is acquired as an integral part of a modern printing equipment package.