Buying some equipment, what allowances can I claim?
For most small businesses almost any capital expenditure is immediately allowable for tax in full provided the total value for the accounts year is less than the Annual Investment Allowance (AIA) of £50k. There are special rules for cars which are not within the scope of this article, and needless to say for such a generous allowance the Revenue take a strong stance in querying any expenditure which does not qualify.
The case which is generally cited in deciding whether expenses are allowable is Attwood (HMRC) v Anduff Car Wash which lays out 2 tests, both of which must be passed for the expenditure to qualify as plant for capital allowances:
- Was the item used for carrying on the business, is it functional and did it earn profits – must be YES
- Was the item used as a premises, or place in which the business was conducted – must be NO
If you are fitting out an office or workshop, building costs (ie premises) will include works on walls, floors, ceilings, doors basically anything which is within the fabric of the building.
The waters have been muddied a little due to the way modern buildings are used and a separate group of “integral features” have been introduced on which allowances are 10% pa unless part of the AIA is still available. These include: electrical, cold water and heating systems; lifts and escalators; and external solar shading. Also included within this 10% pool are long life assets which are any with a lifespan of more than25 years.
In simple terms, anything which does not fall within these categories is termed as plant which includes any fixtures which are brought in including:
- Plant and Machinery (including vans)
- Manufacturing and processing equipment
- Cookers, washing machines, sanitary ware, furniture and furnishings
- Sound insulation specific to business
- Computer and telecoms
- Refrigeration and cooling
- Fire and burglar alarms systems
- Partition walls, where moveable and intended to be moved in course of business
- A number of other assets related to specific industries (eg farming/shipping)
100% relief is avaiable on all of these items under the AIA so as noted above, this area needs to be considered carefully in planning asset purchases in order that the maximum tax relief is gained. You should always seek professional advice if in any doubt.
