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Date of publication: September 2016

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).

  • £25,000 from April 2012
  • £250,000 from January 2013 for two years.
  • £500,000 from April 2014 to January 2016
  • £200,000 from January 2016

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:

  • new and unused cars with low CO2 emissions (less than 75g/km) or zero emission (electric) vehicles.
  • energy saving equipment that’s on the energy technology product list.
  • water saving equipment that’s on the water efficient technologies product list.
  • plant and machinery for gas refuelling stations, e.g. storage tanks, pumps.
  • gas, biogas and hydrogen refuelling equipment.
  • new zero-emission goods vehicles.

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

Plant and Machinery Writing Down Allowances:

  Standard Rate Special Rate
Before April 2008 25% N/A
From April 2008 to April 2012 20% 10%

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 130g/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 75g/km and 130g/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 75g/km or below

  • 100% first year allowance

Cars with emissions of 130g/km or higher are held in a special pool of assets and any balancing charges or allowances are claimed on disposal.

TAX 3

Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice.  Please contact us if you have any questions about the information set out above.

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