If you buy an asset – for example: a car, tools, machinery or other equipment for use in your business – you cannot deduct your expenditure on that asset from your trading profits. Instead, you may be able to claim a capital allowance for that expenditure.
Capital allowances are also available for certain building-related capital expenditure, for qualifying capital expenditure on qualifying research and development, for donations of used business assets to charity, and certain other capital expenditure.
The aim is to give tax relief for the reduction in value of qualifying assets that you buy and own for business use by letting you write off their cost against the taxable income of your business.
Capital allowances are available to sole traders, self-employed persons or partnerships, as well as companies and organisations liable for Corporation Tax.
Items that qualify for plant and machinery allowances
Tools, machinery, vehicles and other equipment you own (having bought them for your business) will generally qualify for plant and machinery allowances.
Some common examples include:
Annual Investment Allowance (AIA)
AIA is available for most businesses, including partnerships. It is not available for trustees or mixed partnerships (partnerships which are not made up entirely of individuals). Businesses can claim an AIA for capital expenditure incurred on most items of plant and machinery.