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.
• A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

• Special rules apply to accounting periods straddling the dates shown in the tables below.
• The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

AIA limits – sole traders and partnerships

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 6% in the ‘special rate pool‘.
• A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Other allowances

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 2021

• • 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.
  • A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

  AIA

  • Special rules apply to accounting periods straddling the dates shown in the tables below.
  • The AIA may need to be shared between certain businesses under common ownership.

  AIA limits – companies

  Annual limit
  £
  1,000,000

  AIA limits – sole traders and partnerships

  Annual limit
  £
  1,000,000

  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 6% in the ‘ special rate pool ‘.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

  Other allowances

  Corporation tax super-deduction on certain plant and machinery until 31 March 2023	130%
  First Year Allowance (FYA) on certain plant, machinery and cars of 0 g/km	100%
  Corporation tax FYA on long-life assets, integral features of buildings, etc. until 31 March 2023	50%
  Corporation tax FYA (‘full expensing’) on certain new, unused plant and machinery from 1 April 2023	100%
  Corporation tax FYA on new, unused long-life assets, integral features of buildings, etc. from 1 April 2023	50%

  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 2021

  Emissions (g/km)	Pool	Allowance
  0	Main rate	100% FYA
  ≤ 50	Main rate	18% WDA
  >50	Special rate	6% WDA