Plant and machinery
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 Allowances (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.
A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.
The AIA may need to be shared between certain businesses under common ownership.
AIA limit - companies: £1,000,000
AIA limit - sole traders and partnerships: £1,000,000
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 6% in the 'Special rate pool'.
A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.
|Type ||Allowance |
|Corporation tax super-deduction on certain plant and machinery until 31 March 2023 ||130% |
|First Year Allowance (FYA) on certain plant, machinery and cars of 0 g/km ||100% |
|Corporation tax FYA on long-life assets, integral features of buildings, etc. until 31 March 2023 ||50% |
|Corporation tax FYA ('full expensing') on certain new, unused plant and machinery from 1 April 2023 ||100% |
|Corporation tax FYA on new, unused long-life assets, integral features of buildings, etc. from 1 April 2023 ||50% |
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% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.
Cars acquired from April 2021:
|Emissions (g/km) ||Pool ||Allowance |
|0 ||Main rate ||100% FYA |
|≤ 50 ||Main rate ||18% WDA |
|> 50 ||Special rate ||6% WDA |