Taxes Consolidation Act 1997 section 290

Option in case of replacement

Section 290 allows a taxpayer who replaces machinery or plant to elect to defer a balancing charge by setting it against the cost of the replacement machinery or plant.

• Where a balancing charge arises on the disposal of machinery or plant and the taxpayer replaces it, the taxpayer may elect in writing to the inspector to have the charge deferred against the cost of the replacement asset.
• If the cost of the replacement asset equals or exceeds the balancing charge, no charge is made, but capital allowances on the new asset are calculated on a reduced cost figure (actual cost less the deferred charge).
• If the balancing charge exceeds the cost of the replacement asset, the charge is reduced to the excess, and no capital allowances are available on the replacement asset.
• When the replacement asset is itself eventually disposed of, the deferred balancing charge is treated as though it were an initial allowance, ensuring the correct overall allowances are given across both assets.