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Capital Allowances Plant and Machinery

  • The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However tax relief is available on certain capital expenditure in the form of capital allowances.
  • Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘integral features‘), computers, cars, vans and similar equipment used in a business.
  • There are special rules for cars and certain ‘environmentally friendly’ equipment.
  • Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
  • The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
  • Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

AIA

  • The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:

Annual limit

£
From 1 January 2016 200,000

AIA limits – sole traders and partnerships

Expenditure incurred:

Annual limit

£
From 1 January 2016 200,000

Other plant and machinery allowances

  • Expenditure upon which AIA is not given/claimed will obtain relief through the ‘main rate pool‘ or the ‘special rate pool‘ rather than each item being dealt with separately.
  • The annual rate of WDA is 18% in the ‘main rate pool‘ and 8% in the ‘special rate pool‘.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Cars

  • For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
  • AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.

Cars acquired from April 2018

Emissions (g/km)

Pool

Allowance

≤50 Main rate 100% FYA
≤ 110 Main rate 18% WDA
>110 Special rate 8% WDA

‘Integral features’

FA 2008 introduced a new classification of items in a building or structure, expenditure on the provision or replacement of which qualifies for writing down allowances at the lower rate available for the special rate pool. The main features that are normally integral to a modern building (such as electrical, cold and hot water systems) therefore qualify for plant capital allowances but at the lower rate.

‘Main rate pool’

The main rate pool is one of the two general pools into which plant expenditure is allocated (the other being the special rate pool).

‘Special rate pool’

The special rate pool is one of the two general pools into which plant expenditure is allocated (the other being the main rate pool). The main items in the special rate pool are integral features and some higher emission cars.

Disclaimer

This publication is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.

Company Information Walker Thompson is a trading name of Walker Thompson Ltd registered in England and Wales. Company registration number 06574838

Registered Office Empress House :: 43a Binley Road :: Coventry CV3 1HU :: T 024 7663 5522 :: F 024 7663 5518 :: E clientcare@walkerthompson.co.uk