Capital Allowances UK – What You Can and Cannot Claim on?

Keywords – Capital Allowances – Capital Allowances UK

As a business owner or director, there is a good chance you will have already heard about capital allowances. However, are you making the most of these benefits?

In this article, we are going to quickly explore precisely what you can claim as a capital allowance as well as how to kickstart your application.  

What can I claim capital allowance on?

In short, you can claim capital allowance when you purchase an asset you use for your business. The official name for these kinds of items is; ‘plant and machinery’. Typically, these tend to be pieces of equipment and machinery, or in some cases, vehicles. But, the full list is far more extensive.

You can also claim for:

  • The cost of renovating business premises located in disadvantaged areas
  • Research and development projects
  • Extracting minerals
  • Intellectual property on industrial techniques
  • Dredging
  • Patents

When making a capital allowance claim, you might be permitted to subtract a fraction of the value (or in some cases, the entire cost) of these purchases from your business’ profits – before paying tax. If you would like to get further advice, get in touch with us today.

Interestingly, if you are either a sole trader or partner earning an annual income of £150,000 (or less), you might be permitted to use an even easier system called ‘cash basis.’ If that applies to you, we thoroughly suggest researching this process to see how you could benefit. Or, again, simply get in touch with us for further advice.

Things you can’t claim capital allowance on

It is also important to understand where you cannot claim a capital allowance. This includes

  • Anything you are leasing
  • Land
  • Things used purely for entertainment, for example, a pool table
  • Buildings (this includes –  gates, doors, shutters, water and gas systems)
  • Structures like roads, bridges, docks, etc.

How do I work out an item’s value?

Typically, the value of your purchase is just how much you paid for it.

However, you will have to use the market value instead if you received the item as a present or if you owned it before you used it for business purposes.

In both cases, you must be able to prove the value of the item. This can be done either through a receipt or providing evidence for the market value of the item.

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