Capital allowances computations

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Capital allowances computations
  • Plant and machinery allowances
  • Calculating writing down allowances ― the 'general pool'
  • Additions and disposals
  • Balancing adjustments ― general pool
  • Balancing adjustments ― single asset pools
  • Cessation of a business
  • Writing down allowances ― short and long accounting periods
  • Claiming capital allowances
  • Disclaiming capital allowances
  • Planning points
  • Small plant and machinery pools
  • Short-life assets

There are anumber of changes included in Finance Act 2019 which affect capital allowances computations:

  • the annual investment allowance (AIA) has been temporarily increased to £1,000,000 with effect from 1 January 2019. This is due to reduce back down to £200,000 from 1 January 2021. See the Implications of the temporary increase in annual investment allowance news item
  • the special writing down allowance reduces to 6% per annum with effect from 1 April 2019 for corporation tax purposes, and 6 April 2019 for income tax purposes
  • capital allowances will be introduced for the construction of buildings and structures, available on expenditure incurred on or after 29 October 2018. These must be used for building anew commercial qualifying activity and costs exclude dwellings, holiday and overnight accommodation and the costs of land. FA 2019, s 30 predominantly makes provision for HM Treasury to enact the measures by regulation
  • there are anumber of changes to what assets will be eligible for first year allowances (FYAs). Items on the Energy Technology List and the Water Technology List will no longer be eligible from April 2020. FYAs on electric vehicle charge points will be available until April 2023

All measures were announced at Budget 2018 on 29 October 2018. See Budget 2018 ― owner-managed businesses overview for more information.

Plant and machinery allowances

Three types of allowance are available for expenditure on plant and machinery:

  • AIA, which provides a100% allowance for the first £200,000 of expenditure per year (temporarily increased to £1,000,000 with effect from 1 January 2019 until 31 December 2020)
  • FYAs, which also provide a100% allowance for

More on Capital allowances: