Writing down allowance (WDA) is given on a straight-line basis.
The annual amount is a fixed percentage of the qualifying
expenditure. The qualifying expenditure is fixed when WDA begins
CA33500 and that means WDA does not
change unless the length of the chargeable period changes.
The annual rate of WDA for a person who constructs an
industrial building or buys it unused is 4% of the qualifying
expenditure (the construction costs or purchase price)
unless the building qualifies for the special
rates of IBA for buildings in enterprise zones. For those buildings
the annual rate of WDA is 25%.
The 4% WDA is increased or reduced if the chargeable period
is more or less than a year. For example, if the chargeable period
is 9 months long the rate of WDA is 3% (= 4% x 9/12).
Recalculate the WDA when someone buys a used industrial
building as follows:
Example Green builds an industrial building for
£1 million excluding the cost of the land in 1989 and brings
it into use on 1 January 1990. The annual rate of WDA for Green is
£40,000 (= 4% x £1 million). On 1 January 2000 he sells
it to Brown for £1,400,000 of which £50,000 relates to
the land so that the price paid for the building is
£1,350,000. The residue of qualifying expenditure after sale
is £1 million and this is the amount that Brown can claim IBA
on. There are 15 years left of the period of 25 years that started
on 1 January 1990. Brown's annual rate of WDA is £66,667 for
14 years with the balance of unrelieved expenditure, £66,662,
given for the final year.
WDA is also calculated in this way where the used building
has qualified for the special rate of WDA for buildings in
enterprise zones
CA37000.
