Capital Allowances are the deductions which allow businesses to secure tax relief for certain capital expenditure. Capital Allowances are available to sole traders, self-employed persons or partnerships, as well as companies and organisations liable to Corporation Tax.
Interestingly, the Capital Allowance legislation does not specifically define plant and machinery (P&M). However, there is legislation that makes it clear that most buildings, parts of buildings and structures are not P&M. Attached to this legislation is confirmation that the following listed items are to be treated as if they were P&M for Capital Allowance purposes.
P&M generally includes items such as cars, vans, machines and the working parts of machines, equipment, computers, furniture and other similar items used by a business. The meaning of the term ‘plant’ can be difficult and before any claim is made it is important to ascertain if an allowable deduction can be made. There are also special rules for items of P&M used privately before being used by a business as well as for items used only partly for business purposes.