ABSTRACT
Capital expenditure cannot be written off by a trader against income when calculating income for the purpose of taxation. Equally if he depreciates his fixed assets such depreciation is not allowable as a deduction against profit. However, tax legislation allows for relief to be given on certain items of capital expenditure and these standardized depreciation allowances are known as capital allowances. Capital allowances can be set off against trading income when the expenditure occurs and/or over a number of years of the ownership of the asset. For companies capital allowances are treated as a trading expense. In the case of partnerships or individuals, however, they are created as a specific deduction.
