Entitlement to plant and machinery allowances

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Entitlement to plant and machinery allowances
  • General rule
  • Qualifying expenditure
  • Ownership
  • Exceptions to the ownership requirement
  • Timing of expenditure
  • Qualifying activity
  • Long funding leasing
  • Anti-avoidance

General rule

The general rule is that capital allowances are available for 'qualifying expenditure' incurred by a person carrying on a 'qualifying activity'. ‘Person’ includes both companies and individuals, however, this guidance note is written from the perspective of company claimants.

CAA 2001, s 11
Qualifying expenditure

'Qualifying expenditure' is capital expenditure incurred on plant or machinery that is wholly or partly used in the qualifying activity carried on by the company incurring the expenditure. The person incurring the expenditure must also own the asset as a result of incurring the cost of it.

CAA 2001, s 11(4)

Expenditure which is covered by a subsidy is not qualifying expenditure. However, subsidies made by private entities will be qualifying expenditure where the donor cannot claim capital allowances on the expenditure. See Contributions below.

CAA 2001, s 532; CAA 2001, s 536

Prior to April 2013, if a public subsidy was withdrawn and repaid then the repayment was treated by concession as qualifying expenditure. This concession was withdrawn with effect from 1 April 2013 for corporation tax purposes.


Qualifying expenditure includes deemed expenditure on plant or machinery which has been received as a gift. The recipient is treated as having incurred expenditure equivalent to the market value of the plant or machinery on the date the recipient brings it into use for a qualifying activity.

CAA 2001, s 14

Generally, capital allowances will only be available where the person incurring (or deemed to have incurred) the expenditure owns the plant or machinery as a result of incurring it. However, there are a few exceptions to this (see below).

CAA 2001, s 11(4)(b)

The plant or machinery does not need to be wholly owned. Expenditure on a

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