A person who has a qualifying activity may receive a payment to
cover the depreciation of an asset used in that qualifying
activity. For example, an employee who uses an asset that he or she
owns in his or her work may receive a payment from his or her
employer to cover all or part of the depreciation of that asset.
A payment is a partial depreciation subsidy if:
The payments were known as wear and tear allowances until the
If you have case where a person receives a partial depreciation subsidy restrict allowances and charges on a just and reasonable basis. For example, if the subsidy is meant to cover half the depreciation you should calculate the allowance in the normal way and then give half of it. The expenditure is put into a single asset pool so that the restriction can be made. You should deduct the full amount of the allowance before the restriction in calculating the unrelieved qualifying expenditure.