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Date of publication: May 2012

The Capital Expenditure of a business is not deducted when arriving at the taxable profit. Instead allowances are given against tax, based upon date of expenditure as follows:

Annual Investment Allowance (AIA):

100% relief for capital expenditure – subject to certain exclusions, notably cars (see below).

• £50,000 prior to April 2010
• £100,000 from April 2010 to April 2012
• £25,000 from April 2012

Amount is pro-rated for long or short accounting period.

It is provided on a group wide basis, so groups of companies have to decide upon the allocation of the allowance between their members.

100% First Year Allowance:

In addition to the AIA 100% relief is available on the following capital expenditure:

• Specified environmentally beneficial plant or machinery
• Specified energy saving plant or machinery
• Cars with CO2 emissions under 110g/km or zero emission goods vehicles
• Plant or machinery for certain refuelling stations and for use by a company in a Ring Fenced Trade.
• Capital expenditure for qualifying research & development.

The specified plant and machinery is detailed on lists produced by the government.

Plant and Machinery Writing Down Allowances:

Writing Down Allowances are given on a reducing balance basis.

The Special Rate applies to Integral Features (see below), long-life assets, thermal insulation and, from April 2009, higher emission cars (see below). The Standard Rate applies to everything else.

Integral Features:

Integral features are:

• an electrical system (including a lighting system),
• a cold water system,
• a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
• a lift, an escalator or a moving walkway,
• external solar shading.

Short life assets:

Rather than treating an asset as part of a general pool, assets with an expected life of under 8 years can be recorded and receive tax relief on an individual basis, relief will be accelerated when they are disposed of or scrapped. An election in writing is required to take advantage of this accelerated relief.

Cars:

Emissions above 160g/km

• Bought before 1st April 2009 - standard 25% or 20% plant and machinery allowance, capped at £3,000 per year.
• Bought after 1st April 2009 - special 10% (8% from April 2012) reduced rate with no cap on amount claimed per year.

Emissions between 110g/km and 160g/km

• Bought before 1st April 2009 - standard 25% or 20% plant and machinery allowance, capped at £3,000 per year.
• Bought after 1st April 2009 - standard 20% (18% from April 2012) allowance with no cap on amount claimed per year.

Emissions of 110g/km or below

• 100% first year allowance

Cars with emissions of 160g/km or higher are held in a special pool of assets and any balancing charges or allowances are claimed on disposal.