Maximising your capital allowances

 

Have you purchased equipment or a vehicle, acquired a property, completed a refurbishment project, or plan to do so soon? Remember that these activities are eligible for capital allowances and need to be claimed on your tax return. 

 

More importantly, if you are planning to undertake work or make a purchase that is eligible under super-deduction or special rate capital allowances you need to make the purchase or complete the project by 31 March 2023. 

 

Super-deduction and special rate allowances are coming to an end on 31 March 2023. As these allowances provide much higher rates of relief, if you can make purchases before 31 March 2023 or bring forward any eligible projects it would be worth doing. 

 

 

To claim an item through capital allowances it must meet certain criteria. The main criteria are that it must be owned by the business, therefore leased items are not applicable, and they must be kept for business use. Items eligible are known as ‘plant and machinery’ which can include: 

 

• Equipment and vehicles including cars 

• Elements of your building that are considered integral such as lifts, heating systems, air conditioning and lighting systems 

• Some fixtures in your buildings such as kitchens, bathroom suites, fire alarms and CCTV systems 

• Building alterations to install plant and machinery 

• Cost of demolishing plant and machinery 

 

 

Super-deduction and special rate (SR) first-year capital allowances are temporary allowances that came in after Covid and are due to end on 31 March 2023. These allowances are available on qualifying plant and machinery, and they offer higher rates of relief with super-deduction at 130% and SR at 50%. 

 

The eligibility criteria is slightly different to capital allowances as the plant and machinery must be: 

 

• New and not used and can’t be a gift 

• Cars do not qualify but other vehicles might 

• Can’t be bought to lease to a third party 

• Can’t be purchased in the accounting period that the business activity ceases 

 

 

Annual investment allowance (AIA) was extended to £1m per year during Covid and was due to reduce after 31 March 2023 but it has been permanently fixed at £1m. This can be invested in items where you can deduct the full value from your profits. The eligibility criteria is similar to capital allowances although you can’t claim for: 

 

• Cars 

• Items can’t have been owned by you before using them in the business 

• Items can’t be a gift 

 

 

Don’t forget we are always here to help you, so if you have any queries about any capital allowances, super-deduction or SR allowances contact us and we will be happy to talk you through them.