HOW IS THE USEFUL ECONOMIC LIFE TEST APPLIED?
The test looks at the expected useful economic life of the machinery or plant when new. This will depend on the facts relating to the particular asset. The word “new” is defined in Section 83(1) to mean unused and not second-hand. It follows that the test will depend on the expected life estimated by reference to the facts when capital allowances are first claimed or when the machinery or plant was first brought into use, if earlier. The useful economic life test looks at whether it is reasonable to expect that the useful economic life of the machinery or plant will be at least 25 years, that is, whether it is more likely than not that the life will be at least 25 years. The useful economic life will depend on the way in which the machinery or plant is likely to be used in that business and, if it is likely to be sold in working order, by any subsequent owner. It may be: • directly governed by extraction or consumption, as in the case of a mine; • dependent on its physical deterioratio
