What You Need to Know About Plant and Machinery in Capital Allowance Claims

Getting To Know Asset Pools

There are three main pools when you’re measuring your capital expenditures on plant and machinery.

Typically, there’s the main pool, a special rate pool, and a single asset pool. Knowing where each expenditure falls helps you to manage your spending and know what you could be writing off with each purchase.

Consider the cost of the items and how much it costs to improve or to install them. Which asset pool the expenditure falls into will depend on a number of factors, such as the nature of the item, the expected life of the asset, or sometimes it will purely depend on legislation.

By definition items which are generally classed as plant and machinery will go into ‘General Pool’. Items which fall into ‘Special Rate Pool’ may be items that are an integral part of your buildings, such as heating and lighting.

By definition, items which are generally classed as plant and machinery will go into ‘General Pool’. Items which fall into ‘Special Rate Pool’ may be items that are an integral part of your buildings, such as heating and lighting.

There are two types of ‘single asset pool’. The first type is for certain vehicles, such as expensive cars and the second type is more commonly known as a ‘short life asset pool’ which is used to claim allowances on assets considered to have a short life before being scrapped or replaced.

All About Writing Down Allowance’s (WDAs)

WDA’s provide you with tax relief over the course of several years. While you don’t get immediate tax relief for your capital expenditures, you get relief during the future years of your business.

Allowances are initially calculated on the cost/initial value of the assets in a given financial period.

If the assets are in the General Pool (also often called the main asset pool), the allowances will be claimed annually at 18%. If they are in the Special Rate Pool, the current rate is 8% (to be reduced to 6% from 1st April 2019). Assets in a single asset pool will be written down at 8% or 18% depending on the item and finally, items in a short life asset pool will be written off over a term not longer than 8 years following the year in which the asset was acquired.