Revenue Note for Guidance

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Revenue Note for Guidance

660 Farming: wear and tear allowances deemed to have been made in certain cases

Summary

This section deems a wear and tear allowance to have been given for certain previous chargeable periods when a wear and tear allowance, a balancing allowance or a balancing charge is being calculated for a particular year of assessment in respect of machinery or plant used by a farmer.

Details

Definitions

(1) The expressions “balancing allowance”, “balancing charge” and “wear and tear allowance” are explained by reference to various other provisions of the Act.

Notional wear and tear allowances deemed to have been made

(2) In determining whether a wear and tear allowance, a balancing allowance or a balancing charge is to be made to or on a farmer in respect of machinery or plant, a wear and tear allowance is deemed to have been made for previous chargeable periods in which the farmer owned the item and as if the following conditions were met —

  • the farming profits had been taxed in the normal way,
  • those profits were taxed on an actual (not notional) basis,
  • farming had been carried on by that person since the machinery or plant was acquired,
  • that machinery or plant had been used solely for farming since its acquisition, and
  • an appropriate claim for wear and tear had been made by that person for each chargeable period.

Previous chargeable periods to be taken into account

(3) The deemed wear and tear allowance applies for every previous chargeable period in which the farmer owned the machinery or plant and —

  • did not use it for farming,
  • was taxed under the former notional basis (under which farming income was related to the valuation of the land),
  • did not engage in farming, or
  • was not fully charged on the farming profits.

(4) In the case of companies not within the charge to corporation tax, a year of assessment is taken as a chargeable period of the company.

Limit on balancing charge

(5) This section does not affect section 288(4) which provides that a balancing charge cannot be greater than the capital allowances granted in respect of the machinery or plant.

Relevant Date: Finance Act 2019