What are Capital Allowances?

What are Capital Allowances?

Capital allowances are a means of saving tax when your business buys a capital asset. 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 cars, vans or lorries

These are known broadly as plant and machinery, but can include:

  • items that you keep to use in your business
  • business cars
  • costs of demolishing plant and machinery
  • parts of a building considered integral, known as ‘integral features’
  • some fixtures, for example fitted kitchens or bathroom suites
  • alterations to a building to install other plant and machinery – this does not include repairs

Integral features

  • lifts, escalators and moving walkways
  • space and water heating systems
  • air-conditioning and air cooling systems
  • hot and cold water systems (but not toilet and kitchen facilities)
  • electrical systems, including lighting systems
  • external solar shading

Fixtures

  • fitted kitchens
  • bathroom suites
  • fire alarm and CCTV systems

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

What you cannot claim Capital Allowances on

  • things you lease – you must own them
  • buildings, including doors, gates, shutters, mains water and gas systems
  • land and structures, for example bridges, roads, docks
  • items used only for business entertainment, for example a yacht or karaoke machine

Capital allowance rates

There are a number of capital allowance scheme options and each of these have different rates.

Most items that are used for business purposes qualify for an 18% annual deduction of their value. Assets that are only eligible for an 8% deduction include integral features of buildings such as escalators or air conditioning, items with a long life (25 years or more), thermal insulation of buildings, or cars with higher CO2 emissions.

How TBAT can help

We support business in claiming through the Capital Allowances Scheme. Please contact us for further information.

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