What are Capital Allowances?

Capital allowances are the collective name given to several tax reliefs available for the cost of the wear and tear of particular assets in your business. They help free up cash by reducing the amount of tax you pay to HM Revenue & Customs.

An alternative to claiming Capital Allowances for your business is to pay more money to HMRC.

 

Capital Allowances Key Facts

However, it may surprise you that HMRC wants you to claim this tax relief. They go so far as to dedicate a whole section on their website telling you how to claim it. Why? Because businesses claiming capital allowances have done so as the result of buying assets, which helps to stimulate the economy.

Another surprising fact about capital allowances is that they are not new. This tax relief was created when Queen Victoria was on the throne. Despite being one of the oldest pieces of tax legislation, it is estimated that most business owners have not claimed their full entitlement. This is particularly true where a business owns or leases property.

 

What can I Claim Capital Allowances on?

So going back a couple of paragraphs, Capital Allowances exist as a relief for the cost of the wear and tear of the assets in your business, for example;

• Computers
• Vans, furniture
• Carpets
• Power and heating systems

They are available for the moveable plant, machinery, and fixtures attached to a commercial property. As their assets get older, they become worn, faulty and need to be replaced. Capital allowances help your business meet this cost by reducing your tax bill, allowing you to prepare for the eventual replacement of the asset.

 

Summary

Capital allowances are in short a tax allowable form of depreciation. They are given instead of normal accounting depreciation because HMRC can determine what assets these tax reliefs are provided for and what rate of tax deduction they are given.

The benefit of capital allowances is that by reducing your tax bill, you can replace the asset, reward yourself and staff, or invest in your business.

Your alternative is to pay more money to HMRC.

 

How to Claim Capital Allowances

If you would like some assistance with your capital allowances claim, please get in touch with Cavetta Consulting to check your eligibility today.

Cavetta Consulting are also offering a 10% discount on capital allowances work for our business hub members (it's free to join!)