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Capital Allowances

Capital Allowances allows tax-payers to write-off the cost of specific capital assets against taxable income. They take the position of depreciation charged in the books of accounts, which is not, in general, deductible for tax purposes. We help businesses claim capital allowance when assets are bought for business purpose, for example, business vehicles (Lorries or cars), machinery, and equipment usually referred to as plant and machinery.
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Businesses can deduct all or certain value of the item from the business profit before paying tax. A simpler system, known as cash basis, can be used by sole traders and partners having an annual income of £83,000 or less.

Usually, the value of an asset is the amount paid for the asset. We use the market value if an individual owned the asset before using it in the business or if the asset is a gift. Additional business costs that can be claimed, despite being cost of things that are not business assets include; daily business running costs, and interest payments for buying assets. Our learned team helps businesses claim these costs as business expenses if an individual is a sole trader or partner, or deduct from profits as a business cost in case of a limited company.

Apart for plant and machinery, we help claim capital allowances to renovate business premises in destitute areas of the UK, research and development, extracting minerals, intellectual property know-how, patents, and dredging.

If a new purchased asset qualifies for first year allowances the entire cost can be deducted from profit before tax (PBT). In addition to annual investment allowance, the first year capital allowance can be claimed.

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Also, businesses can claim a type of first year allowance known as the ‘enhanced capital allowance’ for the following equipments:

  • some cars with low CO2 emissions; zero-emission goods vehicles
  • plant and machinery for gas refueling station, for example pumps, storage tanks
  • energy saving equipment, for example, certain motors
  • hydrogen, biogas, and gas refueling equipment
  • water saving equipments, for example, meters, taps, and efficient toilets

We help work out the capital allowance; sole traders can claim on their self assessment, partners can claim on their partnership tax return, a limited company through a company tax return. For employees, the claim amount can be deducted from the profits.

To claim the full value under first year allowance or annual investment allowance, we can also help claim allowances in the accounting period when the asset was bought. In case the entire value is not to be claimed, part can be claimed using writing down allowance and this can be done until the asset is owned.

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The date of the asset bought is:

  • When the contract is signed, if payment is payable in less than 4 months; or
  • When payment’s due, if it is due after 4 months

What we do?

  • Help businesses claim capital allowance when assets are bought for business
  • Help sole traders and partners with a simpler computation system, known as cash basis
  • Advise on all aspects of allowance computation

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