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The charge for depreciation of fixed assets in a branch or company is not allowed as a deduction in computing the adjusted profits charged to income tax. In its place income tax allowances are granted for expenditure on various assets comprising "plant and machinery". This latter term normally covers such items as office furniture and equipment, motor vehicles, machinery, ships, aircraft, glasshouses and buildings.
If capital allowances for a year exceed taxable profits, the surplus may be carried forward and added to the allowances for the following year. An election may be made to have the unused allowances treated as a loss, in which case the allowances will be carried forward only to the extent that they cannot be set off against other assessable income. Expenditure incurred before commencing business is generally treated as having been incurred on the first day of trading.
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