Balancing Charge

A balancing charge is a charge that HMRC uses to prevent you from claiming too much tax relief for a piece of equipment you’ve purchased. This essentially balances the amount of tax you can claim based on buying and then selling an item so that you don’t get a double claim.

Think of the balancing charge as the opposite to a Capital Allowance. You use capital allowances to claim a tax relief for things you buy for your business, such as equipment, thus reducing the tax you pay for the year that you purchased them. Once you then sell this item, the balancing charge is then the capital allowance you claimed minus the price you sold it for. This ensures that your profits are calculated accurately.

We appreciate that this can sound convoluted, but it can be calculated and confirmed for you by an accountant. Make your accounting simple and straightforward by contacting our experts today for advice and support.

Frequently Asked Questions

  • What is a Capital Allowance?

    Capital Allowance is a form of tax relief that enables you to reduce the tax you owe for a year based on purchases made for your business.

  • What does HMRC stand for?

    HMRC is an abbreviation of His Majesty’s Revenue and Customs, and is a department of the UK Government responsible for collecting taxes, some forms of state support and administration of national insurance, among other things.

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