Calculating Capital Allowances: Special Rate Pools

Keywords – Special Rate Pool

If you are calculating your capital allowances via ‘writing down allowances‘ you need to group your business expenses into categories — these are officially known as ‘pools.’

The ‘pools’ your business assets qualify for, is based on their percentage rate. Once you know the percentage rate assigned to each of your business purchases, you can then deduct these sums from your overall profit (before paying taxes).

How Do Pools Work?

Put simply; there are three ‘pool’ rates:

  • The main pool: 18%
  • The special rate pool: 8%
  • Single asset pools. These rates range between 18% and 8%.

The Main Rate Pool

The main rate pool applies to any ‘plant and machinery‘ you purchased within the necessary tax year — unless this expense qualifies for the special rate pool or a single asset pool.

For instance, ‘plant and machinery’ purchases could qualify for the ‘single asset pool’ if you treat them as ‘short life’ assets (more on that in a bit).  

The Special Rate Pool

The ‘special rate’ pool allows you to claim a lesser 8% on your purchases.

The following expenses should qualify:

  • The purchase is an ‘integral feature.’
  • The asset has a long life (items you can use for at least 25 years), and amounts to £100,000. If the value is less than £100,000, your long-life item should qualify for the ‘main rate pool’.
  • Thermal insulation of buildings
  • Vehicles secreting CO2 emissions more than 130g/km

Let’s circle back to ‘integral features’ for a second, by this we mean, the following:

  • Lifts, escalators, moving walkways
  • Heating systems
  • Water heating systems
  • Air-conditioning
  • Air cooling systems
  • Cold water systems
  • Electrical systems
  • External solar shading

You should also be aware; the actual building does not qualify for capital allowances.

We hope this information has clarified how each of the ‘pools’ work regarding capital allowances. For more details on this, please feel free to reach out and contact our friendly team of professionals.

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