Chris Thorpe looks at where we are with capital allowances.
Accounts depreciation is not allowed within tax calculations; it’s too subjective, so instead of that capital allowances generally apply for tax purposes. These allowances have been in place for ‘wear and tear’ to plant and machinery since 1878, with a factory and mills allowance allowing for economic depreciation within a trading business.
HMRC provides a useful history in its Capital Allowances Manual at CA10040. The current legislation is contained within the Capital Allowances Act (CAA) 2001.
What are they exactly?
Allowances themselves are given through a ‘written-down allowance’, which is 18% of the cost and subsequent written-down value of assets in a ‘general pool’ and 6% in a ‘special rate’ pool (which contains cars with CO2 emission of
