capital allowances

Which translation, when

Why

Both jurisdictions let a business deduct the cost of long-lived assets over time rather than at once, but the mechanics differ enough that the translation can mislead. UK capital allowances are a statutory scheme of their own, with an annual investment allowance, writing-down allowances at set percentages, first-year allowances and pooling, and the figure owes little to accounting depreciation. German Absetzung für Abnutzung, § 7 EStG, is closer to depreciation proper, the acquisition or production cost is spread over the asset’s Nutzungsdauer, normally in equal yearly amounts, and the useful life comes from official AfA tables rather than the taxpayer’s choice. So the German write-off tends to be steady and table-driven where the UK allowance is rate-driven and can be front-loaded. Rendering capital allowances as Absetzung für Abnutzung is the right general match, but an adviser who assumes the UK pools and allowances apply in Germany, or that the German steady write-off works like a writing-down allowance, will misstate the deduction. The words align, the systems only roughly do.

Typical mistakes

• German AfA spreads cost over the asset’s useful life in set amounts, § 7 EStG, so importing the UK annual investment allowance or writing-down rates misstates the German deduction.
• The useful life is taken from official tables, not chosen, so treating German depreciation as freely variable, as some UK reliefs allow, is wrong.
• Capital allowances and AfA are different schemes, so a figure computed under one cannot simply be relabelled under the other.

What matters

An adviser comparing how an asset is written off in both countries, the term capital allowances in play: rendering it as Absetzung für Abnutzung is right in outline, but the reader must see that the German write-off follows § 7 EStG over a table-set useful life, not the UK scheme of allowances and pools, so the two figures will not match.

Examples