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Capital Allowances - Claiming

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Capital allowances: the basics

Claiming capital allowances

The aim of capital allowances is to give tax relief for the reduction in value of certain capital assets that you buy and own for business use, by letting you write off their cost against the taxable income of your business.

You won't necessarily be able to claim all the expenditure on an asset in the accounting period when you bought it. The amount you can claim also won't usually be the same as the 'depreciation' in your commercial accounts, which is calculated differently and is not allowable for tax.

How much you can claim will depend on which allowance you are claiming. You can choose not to claim an allowance, or not to claim the full amount. If you claim only part of what you're entitled to you can in most cases carry the balance of unrelieved expenditure forward, and you may be able to claim an allowance on it in a future accounting period. However, in the case of capital expenditure on research and development you must claim the allowance in the accounting period in which you incur the costs.

Sometimes, expenditure on one asset may qualify for more than one allowance. It's up to you to choose which one you wish to claim. Even if expenditure on a particular asset meets the conditions for more than one allowance, you can only claim for it once.

How you claim capital allowances and the time limits for doing so depends on whether you're self-employed or a partner and pay Income Tax, or a company or organisation that pays Corporation Tax.

Self-employed

If you are self-employed, you must claim any capital allowances you are entitled to and wish to claim in your self-assessment Income Tax return. The claim must normally be made within 12 months after the 31 January filing deadline for the return.

The most commonly claimed allowances are for plant and machinery.

 

Partnerships

If your business is a partnership, you need to claim your capital allowances on assets owned by the partnership collectively in the partnership return, not in the returns for individual partners. The most commonly claimed allowances are for plant and machinery. Note that special rules apply on plant and machinery that is owned by one of the partners but used in the partnership's business.

You should make claims on the Partnership Tax return. These should be made within 12 months after the 31 January filing deadline for the return.

 

Companies or organisations liable to Corporation Tax

If your company or organisation is liable to Corporation Tax you must make any claims for capital allowances in your Company Tax Return. When doing so, you must include a separate capital allowances calculation with your return to show how you arrived at the figures you entered.

Your calculation will need to show:

  • which allowance you're claiming
  • how you calculated your claim
  • how much you're claiming

Normally, you deduct the capital allowances you are claiming when you calculate the trading profit figure for Box 3 of your return - or Box 122 if there is a loss rather than a profit.

You must claim capital allowances within 12 months of the filing date for the Company Tax Return for the accounting period you want to make the claim for.

First-year tax credits

There are also some special rules that allow companies to surrender losses attributable to allowances claimed on expenditure on certain, specific energy-saving or environmentally beneficial plant or machinery in return for a cash payment.

Time limits if you omit to make a claim

If after you have sent in your Company Tax, Income Tax or Partnership Return you discover that you have missed a claim, you can request an amendment. However, there are certain time limits on this.