Balancing charge | Practical Law
Balancing charge
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Balancing charge
Practical Law UK Glossary 2-107-6465
(Approx. 3 pages)
Glossary
Balancing charge
When an asset in respect of which
capital allowances
have been claimed is disposed of, there is a comparison between the disposal proceeds and the
tax written down value
. In the case of plant and machinery, this is generally done by reference to the entire pool of qualifying assets rather than on an asset-by-asset basis. If the proceeds exceed the tax written down value, a balancing charge arises which is added to trading profits. This has the effect of clawing back excess allowances previously claimed. For further discussion, see
Practice note, Capital allowances: availability and types of plant and machinery allowances: Calculating WDAs, balancing allowances and balancing charges
.