Annual investment allowance and private use

When an asset is used partly for non-business use the capital allowances that can be claimed have to be reduced to reflect this. If you are only entitled to writing down allowances then each year you write down the asset by 8% or 18% as appropriate and claim the appropriate business percentage. When the asset is sold one takes the average of the business use to work out how much of any balancing allowance should be taxed.

If however the asset qualifies for annual investment allowance (AIA) the business/non-business use is estimated at the outset. When the asset is sold the business/non-business split in that year only is taken into account, not the average over the years that it was used.

This means that the clawback of capital allowances claimed is likely to lower.