The existing short-life asset (SLA) regime allows businesses, who invest in plant or machinery and subsequently sell or scrap that plant or machinery within four years, to elect to treat such assets separately from the main capital allowances pool and generate a balancing allowance on disposal. This Budget extends the period from four years to eight years from the end of the chargeable period when the original expenditure is incurred. This applies to expenditure from 1 April 2011 for corporation tax and 6 April 2011 for income tax payers.
Owing to the administrative burden of keeping detailed records for individual assets and the dates of their sale or destruction, as well as the recent introduction of the Annual Investment Allowance (AIA), many businesses choose not to make SLA elections. The extension of the regime is likely to make it more attractive to businesses that are incurring expenditure substantially above the AIA limit, however, the scale of the balancing allowance generated between years four and eight is less than half of that up to year four.
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