Capital Allowances

Capital Allowances

There are specific sectors in which capital allowances are particularly beneficial. Douglas Home and Co are leading tax specialists and act proactively to identify capital allowance claim opportunities. We work with our clients to get to know every aspect of their business to ensure all potential tax reliefs are planned for and claimed at the right time.

What are Capital Allowances?

Capital allowances (CA) provide relief from income tax and corporation tax in respect of capital expenditure.

To qualify for Capital Allowances, it must be the case that the business has incurred qualifying expenditure on plant and machinery in the course of carrying on a qualifying activity such as a trade, letting of furnished holiday accommodation and letting of commercial property.

What is Plant & Machinery?

Three principles may be drawn from the classic legal definition of ‘plant’.

– Plant is the apparatus used in the business, as opposed to the setting in which the business is carried on;

– It includes all goods and chattels; and

– Is kept for permanent employment in the business.


The legislation provides that an asset cannot be P&M where it falls within either:

– List A: buildings (including walls, floors, ceilings, and windows); or

– List B: structures (including tunnels, bridges, canals, and reservoirs).


However, a number of exceptions are made, including for:

– integral features such as electrical and cold-water systems, ventilation, and

– assets that fall within List C. These include movable partition walls and decorative assets provided for the enjoyment of the public in a restaurant or similar setting.


Expenditure on P&M includes expenditure on alterations to a building made for the purposes of installing the P&M.

Not all P&M is treated equally for capital allowances purposes; the rate at which allowances are given is determined by the nature of the asset. For example, there are two rates of writing down allowance: 6% per annum for special rate expenditure, including integral features, and 18% per annum for main rate P&M.

Annual investment allowance offers 100% relief for plant and machinery. Following the Autumn Budget, it was announced that the AIA limit would be permanently fixed at £1 million per annum. AIA can only be claimed in the tax period in which the item was bought.

First year allowances can be claimed in addition to AIA and do not count towards the AIA limit, with the full cost of qualifying assets able to be deducted from profits before tax. Enhanced capital allowances, a type of first year allowances, can be claimed on certain energy and water-efficient equipment.

First Year Allowances

100% First Year Allowance

If you buy an asset that qualifies for 100% first-year allowances, you can deduct the full cost from your profits before tax.

Enhanced capital allowance is a type of 100% first-year allowance that can be claimed on a range of equipment such as electric cars, zero CO2 emission cars and goods vehicles, and equipment for electric vehicle charging points. To qualify the equipment must be new and unused.

Annual Investment Allowances

The Annual Investment Allowance (AIA) provides 100% relief for qualifying plant and machinery up to the AIA limit of £1 million per annum.

To claim AIA you must be a qualifying person, such as an individual, a partnership consisting of only individuals and a company.

AIA is not given automatically and those who wish to take advantage of the relief must submit a claim. The claim must be for the period in which the expenditure was incurred.

Certain expenses are excluded including expenditure on cars, assets purchased from a connected person and spending incurred in the period of cessation.

Some restrictions apply to the Annual Investment Allowance, and our Capital Allowance experts can provide full details and guidance on whether you are eligible to claim the relief.

Full Expensing

In the 2023 Spring Budget, the government announced a new relief, Full Expensing, to replace Super-Deduction. Full Expensing provides companies with 100% relief on qualifying expenditure in the accounting period in which it was incurred. This relief, which is unlimited, has been available since the 1st of April 2023 and was made permanent in the 2023 Autumn Statement.

To claim Full Expensing, businesses must be incorporated, and only expenditure on new and unused assets can be claimed.

Where a company pays corporation tax at the main rate of 25%, for every £100 of eligible expenditure full expensing will reduce the net cost to £75.

Capital Allowances & Property

Refurbs and new builds 

Capital allowances can be claimed back on capital expenditure incurred on commercial property. As proactive accountants, DH&Co can identify eligible plant and machinery and integral features which can be claimed as CA. We break down all your spending and allocate it appropriately, depending on the nature of the cost.

Purchasing property

If you are looking to purchase a commercial property, it is important to not rush the purchasing process as there may be existing capital allowances available. CA legislation not only allows you to claim on your own plant and machinery expenditure but also for the expenditure of the previous owner if they haven’t claimed. Capital allowances must be identified, and the value of integral fixtures agreed by both seller and purchaser at the point of sale and purchase of the property in order to be claimed. We can work with both the seller and purchaser to correctly identify capital allowance claim opportunities.

Douglas Home & Co are leading tax specialists across the UK, who proactively identify all tax relief opportunities within your business. By taking a holistic approach and assessing every aspect of your company DHCO can ensure all potential tax reliefs are planned for and claimed at the right time.

Capital Allowance Experts

Experts in Capital Allowances

Sheryl Macaulay

We have a team of expert tax advisors specific to this industry that are led by company Director, Sheryl Macaulay.

Having worked with many different businesses within this industry, Sheryl has a wide range of experience to ensure companies are as tax efficient as possible.

She also has an extensive knowledge within specialist accounting areas such as capital allowances, research and development and succession planning. Read more about Sheryl’s experience.

“Douglas Home and Co are a very good fit for our business. They maintain a personal proactive service with director-led advice but also have the tax knowledge to compete with the big four and other large accounting firms. The whole team has been a delight to work with.”

– Tim Griffin

Michael Laird Architects

Super Deduction

There is currently a super-deduction scheme in place enabling businesses to claim 130% capital allowances until the end of March 2023 – click the link below to find out more.

Super Deduction

Latest Tax Insights

  • The Douglas Home & Co directors are thrilled to share some exciting news regarding the future of the business. After over 40 years of dedicated......

  • Yesterday, the Chancellor of the Exchequer, Jeremy Hunt, announced the Spring Budget 2024. Key points from his statement include: From 6th April, employee national insurance......

Contact a Tax Expert

Meeting All Your Accountancy Needs

As well as Capital Allowances support, we also offer a range of other Tax Planning Services to meet your Accountancy needs:

Local support

With offices located across Scotland and North England, we can meet where it is most convenient for you

Industry expertise

Our specialists have knowledge spanning many different sectors including agriculture, property, hospitality and medical businesses

Director led

Our highly experienced directors are involved at all levels of the business, making sure you are getting the best service possible

Forward thinking

We take a modern and fresh approach, helping businesses think outside the box and secure exciting opportunities

Making it personal

We work as an extension to your business, getting to know your unique needs

Helping you grow

We are business development specialists, helping your business to go further

Tax Experts Throughout Scotland and North England

DHCO Offices Map
Accountant Locations
Contact Us