Specialist Tax: Capitalise on your assets
Over half of UK businesses will not have claimed their entitlement to Capital Allowances which could be worth hundreds of thousands of pounds. In this second of a series of specialist tax scheme blogs, we look at how you can claim capital allowances.
When can you claim capital allowances?
You can claim capital allowances when you buy assets that you keep to use in your business. In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA). If you sell the item after claiming AIA you may need to pay tax.
What can you claim capital allowances on?
You can claim capital allowances on ‘plant and machinery’ including:
- items that you keep to use in your business, including cars
- costs of demolishing plant and machinery
- parts of a building considered integral, known as ‘integral features’
- some fixtures, for example fitted kitchens or bathroom suites
- alterations to a building to install other plant and machinery – this does not include repairs
As well as plant and machinery, you can also claim capital allowances for:
- renovating business premises in disadvantaged areas of the UK
- extracting minerals
- research and development
- ‘know-how’ (intellectual property about industrial techniques)
- structure and buildings
What doesn’t qualify for capital allowances?
You cannot claim capital allowances on:
- things you lease – you must own them
- buildings, including doors, gates, shutters, mains water and gas systems
- land and structures, for example bridges, roads, docks
- items used only for business entertainment, for example a yacht or karaoke machine
You can only claim for items in residential property if either:
- you run a furnished holiday lettings business (available for holiday letting for 210 days & let for 105 days or more annually)
- the item is in the common parts of a residential building, for example a table in the hallway of a block of flats
You cannot claim the full value of items you also use outside your business if you’re a sole trader or partner. Reduce the capital allowances you claim by the amount you use the asset outside your business.
How to claim capital allowances
Your accountant at E R Grove & Co can help you to claim capital allowances as part of your annual return. Contact a member of our team for help and advice.