Claiming Capital Allowances

How to Claim Capital Allowances

Capital allowances can be claimed when you have bought an asset that you keep for use in your business, for example:

  • machinery
  • equipment
  • business vehicles, e.g. vans, cars or lorries

The list above is known as plant and machinery.

Before you pay tax, you can deduct some or the whole value of the item from your profits.

Cash basis can be used if you are a sole trader or partner; your income will have to be less than £82,000 yearly in order to qualify. This is a simple system for sole traders and partners.

Working out the value of your item

In most cases, it is the value is what you paid for the item. You can put the value of the item of what you’d expect to sell it for instead of what you have paid for the item, which is known as market value, e.g.:

  • if it was a gift
  • if you owned it before you started using it in your business

Business costs (Other)

The cost of things that are not business assets can be claimed for in a different way. These include:

  • day-to-day running costs of your business
  • items that aren’t in your trade to buy and sell
  • interest payments or finance costs for buying assets

Claim these costs as business expenses if you are a sole trader or a partner, but if you are a limited company you must deduct from your profits as a business cost.

Capital allowances (Other)

You can also claim capital allowances, as well as plant and machinery:

  • for research and development
  • for renovating business premises in disadvantaged areas of the UK
  • for dredging
  • for extracting minerals
  • for ‘know-how’’ (industrial techniques on intellectual properties)
  • for patents

Letting out your residential property

Residential properties, you can only claim for capital allowance if your items in your business qualifies as a furnished holiday lettings business and the items are in the property. Each year the property:

  • must be available for holiday letting for 210 days
  • must let for 105 days or more
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