What are the main capital tax allowances?
Assets will be dealt with either in a main rate pool, a special rate pool or a single asset pool.
|Main rate pool (plant and machinery and cars emitting less than 50g/km C02):|
|New expenditure up to £1m (not cars) – applies from 1 January 2019 to 31 December 2020||100%||2|
|Unrelieved expenditure brought forward: writing-down allowance||18%|
|Special rate pool (long life assets, integral features and cars emitting more than 110g/km C02):|
|Unrelieved expenditure brought forward: writing-down allowance||6%|
|Enterprise zones – detailed restrictions apply||100%|
|Energy efficient and environmentally beneficial technologies (ECA)||100%||4|
|Acquisition installation of new and used electric vehicle charge points||100%||7|
|Brand new cars emitting less than 50g/km CO2||100%||5|
|Structures and buildings (straight line). This allowance commenced 29 October 2018||2%|
|Writing-down allowance: cars|
|51g/km – 110g/km||18%|
|Expenditure on the construction of structures and buildings: flat rate||2%||8|
|Research and Development (R&D) relief for SMEs||230%||6|
|SME cash credit for R&D loss surrendered||14.5%|
|Research and Development (R&D) relief for non-SMEs||12%||&|
|Commercial/industrial buildings in an enterprise zone (EZA)||100% of building cost|
- Capital allowances allow the cost of capital assets to be written off against taxable profits. They replace the charge for depreciation in the business accounts, which is not allowable for tax relief.
- Where a business has a chargeable period of less or more than a year the maximum allowance is reduced or increased pro-rata respectively.
- When the value of the main and special pools before writing down allowance is given are less than £1,000 they may be fully written off.
- A loss attributable to the enhanced capital allowance on ECA’s may be surrendered for a cash payment of two thirds of the corporation tax rate of the loss surrendered (RB12.67% in 2019/20), but limited to the greater of the company’s PAYE and NIC liabilities for the period or £250,000.
- The capital allowance treatment of business cars is: Expenditure on cars with CO2 emissions above 50g/km are included in the special rate pool and attract an 6% writing-down allowance (wda) and expenditure on cars with CO2 emissions of 50g/km or below attract a 18% wda as part of the main pool. Cars with private use remain in single asset pools subject to the appropriate rate of wda according to their emissions. Cars purchased before 1 April 2018 are allocated to the main or special rate pool based on emissions below or above 110g/km respectively. New cars with emissions of no more than 50g/km attract 100% first-year allowances.
- This rate applies to enterprise zones and lasts for 20 years from designation. Enhanced capital allowances will also be available for some new enterprise zones.
- Some of the more unusual areas in which capital allowances can be claimed include: heating installations; electrical installations, water installations, fixed internal fittings, (e.g. sanitary fittings, kitchens, carpets), air conditioning – note that environmentally friendly systems can attract 100% enhanced capital allowances, and communication installations e.g. fire alarms, nurse call systems, IT data points.
- The new structures and buildings allowance applies to the qualifying expenditure on the construction of structures and buildings used in a qualifying business in respect of contracts placed on or after 29 October 2019. No allowance is available on the cost of the land, or on buildings in residential use.
Enhanced capital allowances (ECAs) in Enterprise Zones
100% capital allowances are available on plant and machinery investment made in designated areas of the London Royal Docks Enterprise Zone, three Scottish Enterprise Zones in Irvine, Nigg and Dundee, Humber and Deeside in North Wales. These allowances are available, but there are some restrictions on which businesses may claim them, to ensure that the allowance is targeted at new economic activity for which new additional plant and machinery is purchased.