Capital allowances are available on plant and machinery used in your business and are deductible from trading profits, reducing the amount of tax payable.
Plant and machinery includes the following:
- Equipment such as tools and computers
- Fixtures and fittings such as fitted kitchens, bathroom suites and firm alarm and CCTV systems
- Integral features including lifts and escalators; space and water heating systems; air-conditioning and air cooling systems; hot and cold-water systems; electrical (lighting) systems and external solar shading
- Cars and vans
- Other items used (wholly or partly) in your business
Items which do not qualify as plant and machinery include
- Buildings including doors, gates, mains water and gas systems
- Land and structures
- Leased items
The following types of capital allowances are available:
Investment Allowance (AIA)
- AIA can be claimed on most plant and machinery up to the AIA limit
- AIA limit from 1 January 2019 £1 million (from 1 January 2016 £200,000)
- AIA limit from 1 January 2021 £200,000
- The cost of qualifying assets is deducted from the AIA limit
- Where a business has a chargeable period which spans either 1 January 2019 or 1 January 2021, the transitional rules will apply. This means that the AIA entitlement is based on the proportion of the period falling prior to or after these dates. The entitlement is also capped at £200,000.
- The amount of AIA you can claim is restricted for items with personal use.
- First Year
- FYA are enhanced capital allowances which are available on energy efficient equipment, water saving equipment, cars with CO2 emissions less than 75g/km (or electric) and new zero-emission goods vehicles.
- There is no FYA limit, qualifying assets receive 100% FYA
- Written Down
- WDA are claimed on any amount above the AIA limit and items not qualifying for AIA (eg. cars)
- Items are pooled and WDA are claimed at different rates.
- For main pool assets such as plant and machinery, the rate is 18%. For special rate pool assets such as integral features and cars with CO2 emissions over 130g/km, the rate is 8%
Capital Allowances within buildings
Some businesses fail to maximise the capital allowances they can claim and therefore pay too much tax. One of the main areas where they under claim relates to the capital allowances available in buildings. A building contains main items that are eligible for capital allowances including:
- Electrical and lighting systems;
- Heating and cold-water systems;
- Air conditioning;
- Kitchens and
Crowthers are experienced at assisting companies to identify the expenditure that qualifies for tax relief in relation to buildings. In particular we specialise in:
- Identifying items eligible for capital allowances in relation to the development of a new building or the refurbishment of an existing building;
- Advising on the capital allowance position during the sale or purchase of an existing building. In April 2012 some complicated rules were introduced that mean if you do not take the necessary steps relating to capital allowances during the transaction, the tax relief available on the building will be lost forever, potentially devaluing your asset.
Crowthers offer a range of Corporate Tax Services. Please visit our services page for further details.