What are capital allowances?
Capital allowances are a form of tax relief. They are given on expenditure by a business on the provision of plant and machinery and certain building types for use in their trade. Lessors are also entitled to claim allowances. The value of the allowances to a business or lessor is that they can be set against taxable profits over a number of years following the year of expenditure. The number of years over which the allowances are claimed depends on the particular allowance claimed, the size of the business concerned and the size of the business profits available. Capital allowances are often considered to be the taxman’s replacement for depreciation although businesses that do not depreciate assets are not debarred from claiming allowances – therefore they can be a real financial benefit. In addition they are used as an incentive to encourage commercial investment on, for instance, development in deprived areas or energy saving plant and machinery.
Related Questions
- I BOUGHT/BUILT/REFURBISHED MY PROPERTY SEVERAL YEARS AGO, BUT HAVE NOT CLAIMED CAPITAL ALLOWANCES (OR SUSPECT I MAY HAVE UNDER-CLAIMED). CAN I CLAIM THE MISSED ALLOWANCES NOW?
- CAN I CLAIM CAPITAL ALLOWANCES FOR MONEY SPENT ON RESIDENTIAL PROPERTY?
- Can I also claim Enhanced Capital Allowances (ECA) on the same project?
