Special rate pool

By Tolley

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

  • Special rate pool
  • Introduction of the special rate pool
  • Special rate pool and the annual investment allowance (AIA)
  • Integral features
  • Long life assets

Introduction of the special rate pool

The special rate pool was introduced by Finance Act 2008 for qualifying expenditure incurred on or after 1 April 2008.

Expenditure that must be allocated to the special rate pool includes that incurred on:

  • the provision or replacement of integral features
  • long life assets
  • thermal insulation of buildings used in a business
  • cars with CO2 emissions of more than 110 g/km if purchased after 1 April 2018. The CO2 emissions threshold was 130 g/km from 1 April 2013 until then. See the Capital allowances on cars guidance note for further details

The special rate of writing-down allowances is 6% from 1 April 2019, an amendment made by FA 2019, s 31. It had stood at 8% from 1 April 2012 and 10% before that date, since its introduction.

Where there is a change of the special rate during a chargeable accounting period, a hybrid rate must be used for the whole period. In the case of the rate change in April 2019, the transitional rules in FA 2019, s 31(4)–(7) set out the exact method of calculating the hybrid rate. The hybrid rate is calculated by a strict time apportionment using the number of days at each rate out of the total number of days in the chargeable period. The resulting percentage is rounded to two decimal places. The calculation may not be done on a monthly basis.

For example, where an unincorporated business has a year end of 31 December 2019, the rate will be 6.53%, being the hybrid rate of 95 days at 8% and 270 days at 6%, rounded up to two decimal places.

Special rate pool and the annual investment allowance

More on Capital allowances: