Click this link to take you to relevant pages on HMRC website.
According to HMRC, we cite below their explanation of Capital Allowances:
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 as plant and machinery.
You can deduct some or all of the value of the item from your profits before you pay tax.
If you’re a sole trader or partner and have an income of £150,000 or less a year, you may be able to use a simpler system called cash basis instead.
Work out the value of your item
In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:
- you owned it before you started using it in your business
- it was a gift
Other business costs
You claim for the cost of things that are not business assets in a different way. This includes:
- your business’s day-to-day running costs
- items that it’s your trade to buy and sell
- interest payments or finance costs for buying assets
Claim these costs as business expenses if you’re a sole trader or partner, or deduct from your profits as a business cost if you’re a limited company.
Other capital allowances
As well as plant and machinery, you can also claim capital allowances for:
- renovating business premises in disadvantaged areas of the UK
- extracting minerals
- research and development
- ‘know-how’ (intellectual property about industrial techniques)
- patents
- dredging
- structure and buildings
If you let out residential property
You can only claim for items in residential property if your business qualifies as a furnished holiday lettings business. In each year the property must be:
- available for holiday letting for 210 days
- let for 105 days or more
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).
If you’re a sole trader or partner and have an income of £150,000 or less a year, you may be able to use a simpler system called cash basis instead.
What does not count as plant and machinery
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
What counts as plant and machinery
Plant and machinery includes:
- items that you keep to use in your business, including 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
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
Integral features are:
- 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
You can claim for fixtures, for example:
- fitted kitchens
- bathroom suites
- fire alarm and CCTV systems
You can claim if you rent or own the building, but only the person who bought the item can claim.
When you buy a building from a previous business owner you can only claim for integral features and fixtures that they claimed for.
You must agree the value of the fixtures with the seller. If you do not you cannot claim for them. Agreeing the value also means the person selling the assets can account correctly for them.
If you let residential property
You can only claim for items in residential property if either:
- you run a furnished holiday lettings business
- the item is in the common parts of a residential building, for example a table in the hallway of a block of flats
Care workers
There are special rules if you run a care business.
Click this link to take you to relevant pages on HMRC website.