An election to have an asset treated as a short life asset (SLA):
If a person incurs expenditure on a SLA in parts, the time limit
for making a SLA election depends upon the period in which the
first part of the expenditure was incurred.
Example Jackson buys a computer in his accounting
period ended 31 July 2002. If he wants to make a SLA election he
must do it by 31 January 2005.
If Jackson incurs the expenditure on the computer in two
instalments, half in his accounting period ended 31 July 2002 and
half in his accounting period ended 31 July 2003 the time limit for
making a SLA election is still 31 January 2005.
Expenditure on an SLA goes into a single asset pool. No other
expenditure goes in that pool. If there has not been a final
chargeable period by the four year cut off the expenditure in the
SLA pool is transferred to the main pool. The
four-year cut off is the fourth anniversary of the
end of the chargeable period in which the qualifying expenditure on
the asset was incurred.
Example As in the example above Jackson buys a
computer in his accounting period ended 31 July 2002 and makes a
SLA election. If Jackson still owns the computer on 31 July 2006
the expenditure in the SLA pool is transferred to the main pool.
Strictly, an election for short life asset treatment should
specify each asset it covers together with its cost.
If separate identification of the SLAs acquired in a
chargeable period is impossible or impracticable, then you should
accept an election that gives information about the assets by
reference to batches of acquisitions, with their costs aggregated
and shown in one amount provided that you are satisfied that:
Strictly, each SLA should go into its own separate pool and so
that the allowances on it are calculated separately. This may not
be practicable where assets are held in large numbers. In cases
like that capital allowance computations that give the correct
statutory result, and do not abuse the SLA provisions, should be
accepted even if there is not a separate computation for each
asset.
Example Alice runs a restaurant and, every year,
buys glasses to use in the business. She agrees with her Inspector
that the glasses have an actual life of three years and that
nothing is received for the remains.
She spends £1,200 on wine glasses in the year ended 30
June 2002 and makes a SLA election. She can make a single capital
allowance calculation for that expenditure of £1,200 and claim
a balancing allowance for the year ended 30 June 20056 based on a
disposal value of nil. None of the glasses bought in the year ended
30 June 2002 should still exist by then because they have an actual
life of 3 years and Alice will not have received anything for the
remains.
If Alice spends £1,500 on glasses in the year ended 30
June 2003 and makes another SLA election, that expenditure is put
into a separate pool.
If in the year ended 30 June 20056 Alice sells the broken
glass for recycling for £50 and the £50 is not treated as
a trading receipt, then it should be treated as disposal proceeds.
If the disposal proceeds cannot be tied to any particular
acquisition, then they should be treated as disposal proceeds of
the earliest period for which an SLA pool is in existence.
If the broken glass cannot be related to any particular
acquisition of glasses, the £50 should be treated as disposal
proceeds of the pool for the expenditure of £1,200 incurred in
the year ended 30 June 2002.
