Special rate pool and long life assets

Produced by Tolley

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

  • Special rate pool and long life assets
  • Special rate pool
  • Integral features
  • Expenditure incurred on replacement of an integral feature
  • Integral features and anti-avoidance
  • Long life assets

Special rate pool and long life assets

Special rate pool

Expenditure on some types of plant or machinery must, if neither annual investment allowance (AIA) nor first year allowances (FYAs) are available, be allocated to a ‘special rate pool’.

Expenditure to be allocated to the special rate pool consists of expenditure incurred on:

  1. integral features, see below

  2. long life assets, see below

  3. thermal insulation of buildings used in a business

  4. new or second-hand cars with CO2 emissions of more than 50g/km (reduced from more than 110g/km in April 2021), and

  5. solar panels

CAA 2001, s 104A(1)

The annual writing down allowances available on the special rate pool is 6% from 1 April 2019 (corporation tax) and 6 April 2019 (income tax). Prior to these dates, the special rate was 8%.

Expenditure that would otherwise fall into the special rate pool is eligible for the AIA, with the exception of cars and certain other exclusions, see the Annual investment allowance (AIA) guidance note. In some cases, expenditure may also be eligible for FYAs if it meets the necessary conditions, see the First year allowances guidance note. There is also a temporary first year allowance of 50% for new special rate plant and machinery acquired from 1 April 2021 to 31 March 2023 but only for companies, see the Super-deduction and special rate first year allowance guidance note.

The 6% WDAs for the special rate pool is significantly lower than the 18% rate for the general pool. The time taken to receive 80% of the tax relief available on the expenditure is 26 years in the special rate pool, which compares to only eight years in the general pool. Therefore, it is advisable when allocating the 100% AIA to:

  1. allocate the AIA to assets which would otherwise enter the special rate pool

  2. allocate any remaining AIA to general plant and machinery

For an example illustrating the allocation of expenditure to different pools for an unincorporated business, see Example 1 and for

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