Capital Allowances

As one the UK’s leading tax experts, we’re the best people to help you claim your Capital Allowance refunds. Our aim is to help reduce your tax bill by making the most of Capital Allowances.

 

How to reduce your tax bill by making the most of Capital Allowances

A Capital Allowance is an expenditure your business may claim against it’s taxable profit. Capital Allowances may be ​claimed on most assets purchased for use within your business.

The definition of an asset can alter from business to business. An asset is anything of financial value owned by a person or business. This can then be classified further into categories of land and buildings, fixtures and fittings, motor vehicles, computer equipment, plant and machinery, or stock and cash held at a company’s year-end. Each asset has a different function in your business and the tax rules relating to each can be very different.

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What can you claim against?

You can claim Capital Allowances when you buy assets that you keep to use in your business, for example:

Equipment

Machinery

Business vehicles, for example vans, lorries or cars

You can deduct some or all of the value of the item from your profits before you pay tax. 

You can also claim capital allowances for:

  • Extracting minerals

  • Research and development

  • ‘Know-how’ (intellectual property about industrial techniques)

  • Patent rights

  • Dredging allowances

  • Structures and buildings

What you can claim on?

You can claim capital allowances on items that you keep to use in your business - these are known as ‘plant and machinery’.

In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA). 

What counts as plant & machinery?

  • Items that you keep to use in your business, inc cars

  • Costs of demolishing plant and machinery

  • Parts of a building considered integral

  • Some fixtures, eg. fitted kitchens or bathroom suites

  • Alterations to a building to install other plant and

  • machinery - this does not include repairs

Claim repairs as business expenses if you’re a sole trader or partner - deduct from your profits as a business cost if you’re a limited company.

Integral features are:

  • Lifts, escalators and moving walkways

  • Space and water heating systems

  • Air-conditioning and air cooling systems

  • Hot & cold water systems (but not toilet & kitchen facilities)

  • Electrical systems, including lighting systems

  • External solar shading

You can claim for fixtures, for example:

  • Fitted kitchens

  • Bathroom suites

  • Fire alarm and CCTV systems

You cannot claim plant and machinery allowance on:

  • Things you lease - you must own them

  • Items used only for business entertainment, for example a yacht or karaoke machine

  • Land

  • Structures, for example bridges, roads, docks

  • Buildings, including doors, gates, shutters, mains water and gas systems

You may be able to claim structures and buildings allowance on structures and buildings.