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Capital allowances - plant and machinery

2017/18
  • 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.

AIA

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

AIA limits - companies

Expenditure incurred:

Annual limit

£
1 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000

AIA limits - sole traders and partnerships

Expenditure incurred:

Annual limit

£
6 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000

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 8% in the 'special rate pool'.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

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.
  • The government has announced that for expenditure incurred on cars on or after 1 April 2018 the emissions limits for the main rate and FYA are reduced to 110 and 50 g/km respectively.

Cars acquired from April 2015

Emissions (g/km)

Pool

Allowance

≤75 Main rate 100% FYA
≤ 130 Main rate 18% WDA
>130 Special rate 8% WDA