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Capital allowances
Capital allowances give a taxpayer relief for certain types of capital expenditure, as shown in the table below. Capital allowance ratesThe following capital allowances apply. | Capital type | Allowance rate |
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| Machinery and plant, normal rate | 25% | Reducing balance | | Machinery and plant, first year allowance *1 | 50% | Permanent allowance | | Machinery and plant, long life assets *2 | 6% | Reducing balance | | Motor cars | 25% | Reducing balance (max £3,000 pa) | | Low emission and electric cars | 100% | Cars registered on or after 17th April 2002 | | Industrial buildings and qualifying hotels | 4% | Of cost per annum | | Commercial/industrial buildings in an enterprise zone | 100% | | | Agricultural buildings | 4% | Of cost per annum | | Scientific research | 100% | | | Know how | 25% | Reducing balance | | Patent rights | 25% | Reducing balance | | Cars with low carbon dioxide emissions (not more than 120 gm/km driven) *3 | 100% | | | Natural gas and hydrogen refuelling equipment *3 | 100% | | | Water efficient investments *4 | 100% | |
Notes:
*1 Applies to small and medium sized businesses (as defined by the Companies Act). Cars and certain other assets are excluded. Rate normally 40%, increased to 50% for 1 year from 6 April 2006.
*2 Assets with a working life of 25 years or more unless expenditure on such assets is below £100,000 in the period.
*3 On expenditure between 17th April 2002 and 31 March 2008.
*4 On expenditure from 1 April 2003.
100% first year capital allowances will be introduced for:
- new low emission cars registered on or after 17 April 2002, and
- plant and machinery to refuel vehicles with natural gas or hydrogen fuel.
These allowances will apply to expenditure incurred between 17 April 2002 and 1 April 2008.
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