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Long life assets r plant nd machinery with:
– an expected economic life of 25 years or more
– a total cost of at least £ 100,000 ( for a 12 mnth period).What is the total cost? Is it the minimum purchase price of asset?
What if asset’s economic life > 25 years but total cost is < £100,000 ?
Total cost refers to the total cost of ALL long life assets acquired during a 12 month accounting period.
If a business acquires 2 specialist machines, each costing £80,000 with anticipated useful economic lives of 30 years within a single accounting period, then the Total Costs on long life assets acquired is £160,000. This exceeds £100,000 therefore the assets will be treated as long life and their costs included within the special rate pool.
If, however the purchases were made in 2 separate accounting periods then the Total Cost in each period is less than £100,000 so the long life asset treatment does not apply and the expenditure will be allocated to the main pool.
If of course AIA was available on the total expenditure then it would not be an issue as a 100% allowance would be given immediately
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