By Toby Cotton on Small Business – Advice and Ideas for UK Small Businesses and SMEs
Capital allowances are available on qualifying capital expenditure incurred on the provision of certain assets used in a company or individual’s trade. Not all assets qualify for a capital allowance and the rate of relief will vary. The allowances are deducted from trading profits effectively reducing the tax payable. This would be the income tax for a sole trader or partnership and corporation tax for a company.
In most cases, items purchased which are allocated as “plant and machinery” would achieve 100 per cent relief via the Annual Investment Allowance (AIA). The current AIA limit is £1,000,000 to the 31 December 2021 and then £200,000 from the 1 January 2022.
HMRC is generous in what it considers qualifying expenditure and includes:
Computer equipment and servers
Tractors, lorries, vans
Ladders, drills, cranes
Office chairs and desks
Electric vehicle charge points
Refrigeration units
Compressors
However, certain items, such as cars, and items owned before you started a business and items given to you or your business are ineligible for this AIA claim. You would only be able to claim writing down allowances via the main pool and special rate pool with a lower percentage claimed. The main