Capital allowances are deducted in computing the taxable profits of the rental business, as if they were an expense of the business. They may increase a loss, or turn what would have been a profit into a loss.
Balancing charges are added in computing the taxable profits of
the rental business.
Example
Sandra has rents from several let properties amounting to
£24,000 in the year ended 5 April 2003, and allowable expenses
of £12,500. Her capital allowances on equipment used in the
maintenance of the properties come to £2,800 and there is a
£600 balancing charge (adjusted for private use) on the sale
of her old van (which was partly used privately). Her Schedule A
profit for 2002-03 is £9,300 as follows:
| Rents | £24,000 | ||||||
| Allowable expenses | £12,500 | ||||||
| Profit | £11,500 | ||||||
| Plus balancing charge | £600 | ||||||
| Minus capital allowances | £2,800 | £2,200 | |||||
| Schedule A profit | £9,300 |
