Claiming Capital Allowances

16th October 2019

Whether you are self-employed or run a limited company your business will be allowed to claim tax relief on Capital Allowances.

You can basically claim capital allowances when you buy assets that you keep to use in your business ie Business Vehicles, Equipment, Machinery, etc.

This is done by deducting some or all the value of the asset from the net profits of your business before tax, in most cases, it relates to what you paid for the asset.

Other areas that capital allowances can be claimed which are not always as clear and obvious ie renovating business premises, research & development, and patents.

There are 3 types of capital allowances to claim which are:-

  1. Annual Investment Allowance – Also just known as AIA, this can be claimed against most forms of Plant & Machinery and means the business can deduct 100% of the value of the asset in the year of purchase- the one exception from this is ordinary vehicles.
  2. First Year Allowance - If you buy an asset that qualifies for first-year allowances you can also deduct the full cost from your cost before tax. First-year allowances are enhanced capital allowances there to encourage business owners to invest covers in energy-efficient equipment.
  3. Written Down Allowances - WDA’s are used if you’ve already claimed Annual Investment Allowances that have exceeded the AIA threshold for the year or if the item doesn’t qualify for AIA’s ie ordinary vehicles as mentioned above written Down Allowances are a simple flat-rate split into 3 different percentage pools – main pool 18% (which would cover most plant and machinery), special rate pool 8% (this would be long-life assets and cars with high emissions) and single asset pools with a rate of 8 or 18% depending on the individual item.

An accountant would be able to best advise you of any areas for Capital claims and make the best tax calculations on your behalf.

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