Tax allowances which enable the owner of an asset to take into account depreciation on the asset against taxable income.
You can sometimes claim capital allowances when you buy long-term assets, such as machines, to use in your business. You claim part of the cost each year against your profits, before your tax is worked out.
When an asset is used for business purposes, the purchase cost is not normally allowable as an expense. This is because the asset still has a value after it has been used. However, the value of the asset will decrease over time. An allowance to reflect this depreciation can be claimed instead. This is known as a Capital Allowance.
Tax depreciation allowances
(added July 2002) Fixed assets (such as fixtures and fittings), depreciation and amortisation are not generally allowable deductions from business profits. Instead, Capital Allowances are given as a trading expense. The main tax rules are contained in the Capital Allowances Act 2001. Allowances are available on a variety of expenditure (ranging from Plant and Machinery to Industrial Buildings and Hotels), and various rates (ranging from 4% to 100%)
Allowances against tax for the cost of certain fixed assets. Charges may be imposed to take back capital allowances if you sell capital assets for more than the tax written down value. Capital allowances may be given for plant machinery and industrial buildings, and are also available on agricultural buildings and hotels.
The amounts by which assets are depreciated in a given financial year in a business' books of account which can be offset against (used to reduce) a companyâ€(tm)s taxable profits to reduce it's tax bill. Also called Writing Down Allowances (WDA's).
A tax allowance for businesses on capital expenditure on particular items. These include machinery and plant, industrial buildings, agricultural buildings, mines and oil wells, and scientific equipment.
These are the depreciation of certain fixed assets that are allowed against profits for tax purposes.
These are tax allowances which the owner of equipment is entitled to claim against their taxable income: When the Agreement is a lease Agreement, the lessor claims the capital allowances. When the Agreement is a Purchase Plan, Hire Purchase or Credit Sale, the customer is deemed to be the owner and is thus able to claim the capital allowances.
For qualifying equipment (ie. plant and machinery but also including a licence of computer software) a proportion of the capital cost can be used to relieve tax: the relevant amount is set against company revenue which would otherwise be taxable profit. Most plant and equipment used in business attracts a 25% writing down allowance. A first year 100% capital allowance applies to expenditure on information and communications technology incurred by small enterprises during the three years to 31st March 2003. Expenditure on machinery or plant by small and medium sized businesses will qualify for a first year allowance at 40 per cent of the cost. Long life assets, those with an expected life of 25 years or more, have a 12 per cent allowance in the first year and six per cent thereafter. These rates apply to small or medium sized enterprises (SMEs).
