EIM32861 - Other expenses: interest paid: example

A university lecturer acquires a computer on 6 April 2003 for research purposes. The requirements of EIM70790 are met and they are entitled to capital allowances. The computer cost £6,000 and was financed by a loan on which they paid interest of £600 in 2003 to 2004. 25% of their use of the computer is for private purposes. They are entitled to capital allowances to the extent of the business use, see EIM36570. The computation for 2003 to 2004 would be:

• cost: £6,000
• Writing Down Allowance (WDA): £6,000 × 25% = £1,500
• residual value: £6,000 - £1, 500 = £4,500
• WDA business element: £1,500 × 75% = £1,125

Relief is available to the same extent for interest paid.

£600 × 75% = £450

Relief for £450 is available against general income.