Wear and tear allowances and capital allowances

Produced by Tolley
Wear and tear allowances and capital allowances

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

  • Wear and tear allowances and capital allowances
  • Outline
  • Wear and tear allowance

Outline

A property investor receiving rental income can't deduct from that rental income the cost of the capital expenditure in buying the property, or indeed any alterations thereto, any installation of fixed assets, etc. However, relief may be available for certain types of expenditure in commercial property under the capital allowances regime. Capital allowances can be given in a number of ways, namely:

  1. plant and machinery capital allowances (including a separate pool for certain fixtures integral to a building, which attract a 10% WDA) – see the Special rate pool and long life assets guidance note

  2. annual investment allowance – see the Annual investment allowance (AIA) guidance note

  3. industrial buildings allowances and agricultural buildings allowances (although these will no longer exist after April 2011)

An allowance may also be due for:

  1. energy saving items – see the First year allowances guidance note

  2. contaminated land

  3. business premises renovation – see the Business premises renovation allowances guidance note

A flat conversion allowance was introduced by FA 2001. It is intended to encourage the conversion to residential use of empty or under-used space

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