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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.
  • 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 Limits
£
1,000,000

AIA Limits - Sole Traders and Partners

Annual Limits
£
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%