When you buy an asset, i.e. a car, tools, machinery or other equipment for business purposes, or improve a commercial property, HMRC allows you to offset some of the expenditure for tax purposes through a capital allowance claim.
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.
The rate of tax relief varies from 8% per year to 100% in the first year depending on the amount spent and type of asset.
You can claim capital allowances for the following:
- Equipment that you own and use in your business.
- Assets used for Research & Development.
- Gifts of equipment to charity.
- Certain fixtures and integral features in buildings.
- Flat conversions.
- Business premise renovations where the property has been vacant for at least one year.