Plant and Machinery

The cost of purchasing capital equipment in a business is not a revenue tax-deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.

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Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building ('integral features'), computers, cars, vans and similar equipment used in a business.

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There are special rules for cars and certain 'environmentally friendly' equipment.

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Plant and machinery allowances may be available to owners of commercial property which are let out to a business.

The Annual Investment Allowances (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.

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Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

A Structures and Buildings Allowance of 3% (2% prior to April 2020) may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

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AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.

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The AIA may need to be shared between certain businesses under common ownership.

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AIA limits - companies:

Expenditure incurred​

From 1st Jan 2019 - 31st Dec 2020 (Annual limit (£) - 1,000,000)

From 1st Jan 2021 (Annual limit(£) - 200,000)

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AIA limits - sole traders and partnerships:

Expenditure incurred​

From 1st Jan 2019 - 31st Dec 2020 (Annual limit (£) - 1,000,000)

From 1st Jan 2021 (Annual limit(£) - 200,000)

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Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the 'Main rate pool' or the 'Special rate pool' rather than each item being dealt with separately.

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The annual rate of WDA is 18% in the 'Main rate pool' and 6% in the 'Special rate pool'.

A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

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Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.

AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.

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Cars acquired from April 2018: