Current Capital Allowance Rules

I run a small engineering company, and am looking to purchase some new items of machinery. I understand that assets purchased qualify for Capital Allowances, but can you give me some indication of the likely relief I will obtain on these items?

1st June 2009

The government made significant revision to the capital allowance regime from April 2008 for both incorporated and unincorporated business. As you haven’t detailed exactly what you are purchasing, I have summarised the current allowances available.

All businesses can claim an Annual Investment Allowance (AIA) for expenditure of up to £50,000. This has replaced the 40% and 50% first-year allowances which were available to small and medium-sized businesses before April 2008. Expenditure on plant and machinery that exceeds this level will receive allowances at 20% per annum. However, as temporary measure in the 2009 budget, the chancellor introduced a temporary 40% first year allowance for expenditure on general plant and machinery. 

If the items you are purchasing are categorised as “Integral features” of a building, then they attract a 10% “special rate” of allowances. Assets included here are electrical systems (including lighting systems), cold water systems or water heating systems.

Instead, the items may qualify under a scheme introduced in April 2001 whereby allowances of 100% may be available. Businesses investing in designated energy-saving and water-efficient technologies can reclaim 100% Capital allowances on the expenditure incurred. To see if the items concerned qualify for the increased allowance and for further information on the scheme, visit www.eca.gov.uk and click on “water”. Each year the government adds further items to this list in their annual budget update. Your local TaxAssist Accountant will be able to advise on this further.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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