Category: Capital allowances

Everything You Need To Know About UK’s New 40% First‑Year Allowance

Posted on by Nida Umair

From 1 January 2026 the UK offers a new 40% first‑year allowance (FYA) for plant and machinery. Announced in the Autumn Budget 2025, the permanent relief lets businesses deduct 40 per cent of qualifying expenditure from taxable profits in the year of purchase. It complements full expensing and the £1 million annual investment allowance (AIA) and is designed to encourage investment where those reliefs are unavailable. This guide explains how the allowance works, who can benefit and how to plan for it.

What is the 40% first‑year allowance?

Capital allowances let UK businesses offset the cost of capital assets against tax. The new 40% FYA provides accelerated relief on main‑pool plant and machinery that does not qualify for full expensing. Businesses can claim a 40 per cent deduction in the year of purchase and then claim writing‑down allowances (WDAs) on the remaining balance. This front‑loads tax relief compared with the standard WDA, which spreads relief over several years, thereby improving cash flow and encouraging investment.

Key features of new first-year allowance

  • Rate and permanence: The FYA is a permanent 40% deduction for new main‑rate plant and machinery.
  • Complementary to existing reliefs: Businesses should still use full expensing and the AIA where available because they provide 100% relief. The 40% FYA applies when full expensing or the AIA is unavailable or exhausted.
  • Follow‑up WDAs: The remaining 60% of the asset’s cost continues to receive relief through annual WDAs, which will fall to 14% from April 2026.
  • Not a super‑deduction: Unlike previous temporary measures, the new FYA is permanent and sits alongside full expensing and the AIA.

Who Can Claim the 40% FYA?

One of the most significant aspects of this measure is its broad eligibility:

  • Companies and unincorporated businesses – the relief is available to businesses subject to corporation tax and those subject to income tax (sole traders, partnerships and LLPs).
  • Businesses investing in leased assets – the allowance applies to assets bought for leasing. This corrects a long‑standing exclusion that prevented leasing companies from accessing full expensing. It is therefore particularly valuable for hire companies and equipment‑rental businesses.
  • Large and small businesses – there is no cap on qualifying expenditure, so the relief benefits businesses of all sizes. However, companies should still use their £1 million AIA first.

Qualifying and Excluded Expenditure

Only main‑pool expenditure qualifies. The main pool covers most plants and machinery used in a trade, such as manufacturing equipment, office computers, fixtures and fittings, shop fittings, and trade tools. The following points summarise eligibility:

Qualifying items

  • New plant and machinery used in the business (e.g., machinery, equipment, office and shop fittings, furniture, and kitchen and catering equipment).
  • Assets bought for leasing, including hire fleet vehicles and rental equipment.
  • Assets purchased for leasing within the UK – overseas leasing is excluded.

Excluded items

  • Cars – even low‑emission cars do not qualify for the 40% FYA.
  • Second‑hand or used assets – the FYA applies only to new expenditure.
  • Special‑rate pool assets – integral features (e.g., lifts, electrical systems) remain in the special pool and are not eligible.
  • Assets leased overseas – leasing to overseas businesses remains outside the scope of the FYA.

When Does the New First-Year Allowance Apply?

For corporation tax, expenditure incurred on or after 1 January 2026 qualifies for the 40% FYA. For income taxpayers (sole traders and partnerships), the allowance applies from 6 April 2026. Businesses should therefore plan their capital expenditures around these dates to maximise relief. Purchases made before January 2026 will not benefit from the 40% FYA and will instead attract the existing WDAs.

Relationship With Full Expensing and AIA

Full expensing allows companies to deduct 100% of qualifying new main-rate plants and machinery from taxable profits. It remains available until at least 31 March 2026 and is expected to continue permanently for companies, although the government may review details. Annual investment allowance (AIA) provides 100% relief on up to £1 million of qualifying expenditure for companies and unincorporated businesses each year.

The 40% FYA complements these reliefs:

  • Use full expensing first: Companies should always claim full expensing when eligible because it provides 100% immediate relief.
  • Use the AIA next: Businesses should utilise the £1 million AIA before considering the FYA because it also offers 100% relief.
  • Claim the 40% FYA when other reliefs are unavailable: The FYA is particularly valuable for expenditure on assets excluded from full expensing (e.g., assets bought for leasing) or once a business has exhausted its AIA limit.

Reduction of Writing‑Down Allowances

To finance the new FYA, the government will reduce the main rate of WDAs from 18% to 14% per year. The write-down allowance changes apply from April 1, 2026, for corporation tax and April 6, 2026, for income tax. Businesses should therefore expect slower tax relief on non‑qualifying expenditure and existing main‑pool balances. The reduction makes the 40% FYA more attractive, as it allows a larger upfront deduction before the lower WDA rate applies.

Why does 40% FYA matter?

  • Boosts cash flow: Accelerated relief reduces taxable profits in the year of investment, freeing cash for reinvestment.
  • Encourages investment: It addresses calls to extend reliefs to assets not covered by full expensing, particularly leased equipment.
  • Supports unincorporated businesses: Sole traders and partnerships, who cannot claim full expensing, gain access to substantial upfront relief for the first time.
  • Balances the WDA reduction: With annual WDAs falling to 14%, the FYA mitigates the impact by providing greater relief in the first year.

Tax Planning Tips

Proper planning will help businesses maximise the benefits of the new FYA.

  1. Review expenditure timing: Purchases made on or after 1 January 2026 (6 April 2026 for income tax) qualify for the FYA. Consider delaying acquisitions until after these dates to benefit from the relief.
  2. Use available allowances in order: Claim full expensing (companies only) and the AIA before using the FYA. This ensures the greatest possible deduction.
  3. Assess leasing strategies: If your business buys assets for leasing, the FYA provides upfront relief previously unavailable. The FYA applies only to UK leasing; overseas leasing remains excluded.
  4. Model cash‑flow impact: The reduction of WDAs to 14% increases the tax burden on existing main‑pool balances. Modelling can help determine whether accelerating purchases to claim full expensing or delaying them to claim the FYA offers the best outcome.
  5. Maintain records: Keep detailed records of qualifying expenditure, especially when assets are leased, to ensure the correct claim and avoid HMRC challenges.

Example of How the 40% First-Year Allowance Works in Practice

A self-employed mechanic purchases new diagnostic tools and workshop machinery costing £85,000 in February 2027. His Annual Investment Allowance had already been fully used earlier in the year, and full expensing was not available to him.

He claims the 40% First-Year Allowance, giving an immediate deduction of £34,000 (£85,000 × 40%) against taxable profits.

The remaining £51,000 is added to the main pool and qualifies for writing-down allowances at 14% in the following tax years.

If the mechanic pays income tax at 45%, the first-year tax reduction from the FYA alone is £15,300 (£34,000 × 45%).

This approach provides faster tax relief and improves short-term cash flow, even where full expensing is unavailable.

How Apex Accountants Can Help

We specialise in helping our clients navigate complex tax regimes and capital allowances. Our services include:

  • Capital allowances reviews: We identify all qualifying plant and machinery within your business and ensure you maximise claims under full expensing, the AIA, the 40% FYA and other reliefs.
  • Tax planning and modelling: Our experts model the impact of the new 14% WDA and the 40% FYA on your cash flow, helping you decide whether to accelerate or defer purchases. We also advise on the interplay between capital allowances and other reliefs like research and development tax credits.
  • Leasing strategy advice: For businesses that purchase assets as leases, we design optimised financing and leasing structures to maximise tax efficiency while complying with the new rules.
  • Compliance and claim preparation: We prepare capital allowance calculations and submit claims to HMRC, ensuring proper documentation and minimising the risk of queries.
  • Strategic business advice: Beyond capital allowances, we provide broader tax and accounting support, helping you navigate payroll changes, corporation tax planning and investment reliefs.

FAQs

1. When does the 40% FYA start?

For corporation tax, expenditure incurred from 1 January 2026 qualifies. For unincorporated businesses within income tax, the allowance applies from 6 April 2026.

2. Can I claim the FYA alongside the Annual Investment Allowance?

Yes. You should use your AIA first to claim 100% relief on up to £1 million of qualifying expenditure. Once the AIA is exhausted, any additional qualifying expenditure can benefit from the 40% FYA.

3. Can sole traders and partnerships claim the FYA?

Yes. Sole traders, partnerships, and limited liability partnerships can claim the 40% FYA, unlike full expensing, which is only available to companies.

4. Does the FYA apply to second‑hand assets or cars?

No. The new allowance is restricted to new plant and machinery. Secondhand assets and cars are specifically excluded.

5. Can I claim full expensing and the FYA on the same asset?

No. If an asset qualifies for full expensing or the AIA, you cannot also claim the 40% FYA. Choose the relief that provides the greatest deduction.

6. Is the 40% FYA permanent?

Yes. The allowance is intended to be a permanent feature of the capital allowances regime. However, future governments could amend rates, so keeping abreast of legislative updates is advisable.

7. What happens to the remaining 60% of expenditure?

The remaining cost enters the main pool and attracts writing‑down allowances. From April 2026 the main rate WDA will be 14% (reducing‑balance basis).

8. Does the FYA apply to integral features (e.g., electrical installations)?

Integral features fall into the special rate pool and do not qualify for the 40% FYA. These assets attract a 6% WDA.

9. Is leasing equipment overseas eligible?

No. The FYA excludes assets leased overseas. Only assets leased to UK customers qualify.

10. Should I accelerate purchases to claim the FYA?

It depends. Companies that can claim full expensing may prefer to accelerate purchases before March 2026 to lock in 100% relief. Those investing in leased equipment or unincorporated businesses may benefit from delaying purchases until after 1 January 2026 to access the FYA.

Conclusion

The 40% first‑year allowance represents a significant change to the UK capital allowances regime. By allowing businesses to deduct 40% of the cost of qualifying main pool plants and machinery in the year of purchase, it delivers a meaningful cash flow benefit. Unincorporated businesses and the leasing industry, previously excluded from full expensing, find the relief particularly valuable. However, the writing-down allowance change from 18% to 14% means that planning is critical. To maximise tax relief, businesses should understand the timing rules, prioritise full expensing and the AIA, and seek professional advice when necessary. With careful planning, the new 40% FYA can support investment, improve cash flow and help your business grow.

How to Claim Capital Allowances on Commercial Property in the UK

Posted on by Muhammad Asif

Capital allowances are one of the strongest tax reliefs available to UK commercial property owners. Yet thousands of landlords, investors and trading businesses still pay more tax than they need to. HMRC has recently reminded businesses to review their capital allowance claims carefully, because errors, missing items and aggressive claims are all on the rise. In this guide, Apex Accountants explains how capital allowances for commercial property work, what has changed, and how buyers, sellers and long-term owners can protect and improve their tax position.

Overview of Capital Allowances on Property 

  • Capital allowances give tax relief on qualifying capital expenditure such as plant, machinery, fixtures and parts of a commercial building. 
  • A large part of the purchase price or build cost of a commercial property can qualify, often between 15% and 45%, and sometimes more for fit-outs and hotels. 
  • Since April 2014, “new fixture rules” apply. If the pooling and fixed value requirements are not met on a sale, capital allowances on fixtures can be lost permanently for the buyer and all future owners.
  • Companies can use full expensing and the 50% first-year allowance on qualifying plant and machinery from 1 April 2023 to at least 31 March 2026. AIA at £1 million and standard writing-down allowances remain available.
  • CPSE.1 version 4.0 (issued in 2023) now highlights capital allowances in Section 33, which must be handled with care during property transactions
  • Correct structuring of contracts, clear elections and good records are crucial if you want to protect relief and avoid HMRC challenges.
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How capital allowances apply to commercial property

Capital allowances on property let a UK taxpayer deduct the cost of certain capital assets from taxable profits over time. They sit in tax legislation instead of accounting depreciation. 

Commercial property capital allowances usually relate to:

  • Plant and machinery used in the business
  • Fixtures and integral features within a building
  • Certain structural costs via Structures and Buildings Allowance (SBA)
  • Qualifying expenditure in construction, refurbishment or fit-out projects

They are available to:

  • Individuals with commercial property businesses
  • Partnerships and LLPs
  • UK and non-UK companies within the charge to UK tax
  • UK investors holding commercial property and furnished holiday lets, provided the activity is taxable

Developers who construct and sell property as trading stock usually do not receive capital allowances on that development spend, because their profit is taxed in a different way. 

Types of capital allowances for property 

Annual Investment Allowance (AIA)

  • Gives 100% relief on qualifying plant and machinery expenditure up to £1 million each year.
  • Available to most businesses, including property investors with qualifying plant.

AIA is often used first for items like:

  • Heating and air-conditioning units
  • Security and fire safety systems
  • Electrical distribution equipment
  • Fitted commercial kitchens and bars

Writing-down allowances (WDA)

Where expenditure is not covered by AIA or full expensing, it normally goes into one of two pools:

  • Main pool, with an 18% annual writing-down rate
  • Special rate pool, with a 6% annual writing-down rate, for items such as integral features and long-life assets

Full expensing and 50% first-year allowance

For companies within corporation tax:

  • Full expensing gives 100% relief in year one for qualifying main-rate plant and machinery acquired between 1 April 2023 and at least 31 March 2026.
  • A 50% first-year allowance applies to qualifying special-rate assets over the same period.

These reliefs are particularly attractive for:

  • Large fit-outs of offices, retail units and warehouses
  • New equipment in hotels and leisure sites
  • Refurbishment of building services such as lighting and power

Structures and Buildings Allowance (SBA)

SBA gives a flat annual allowance for qualifying construction or renovation costs on commercial buildings:

  • Rate is usually 3% per year on a straight-line basis for 33 years and 4 months for most projects.
  • Applies to eligible costs incurred on or after 29 October 2018. 

SBA normally covers structural elements and some professional fees, but not land, planning costs or items that qualify for plant and machinery allowances.

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What usually qualifies inside a commercial building

Common examples of plant, machinery and fixtures that often qualify include:

  • Heating, cooling and ventilation systems
  • Hot and cold water systems that are not domestic in nature
  • Electrical systems and lighting
  • Fire alarm, sprinkler and smoke detection systems
  • Security, CCTV and access control
  • Fitted sanitary ware in toilets and washrooms
  • Fitted commercial kitchens and bars
  • Lifts, escalators and moving walkways
  • Certain floor finishes in production or specialist areas

Many of these are “integral features” or fixtures that are part of the property. Correct classification is vital for the right pool and rate. 

Non-qualifying items often include:

  • The land itself
  • External roads and most car parks
  • Standard walls, roofs and basic structure, unless covered by SBA
  • Items used only for business entertainment

Capital allowances during a commercial property purchase

This is where many UK owners lose relief. Since April 2012, and fully from April 2014, the rules on fixtures in second-hand property have been strict. 

Two key conditions must be met on a sale of a commercial building containing fixtures:

The pooling requirement

  • The seller must have pooled its qualifying expenditure on fixtures in a capital allowances pool or claimed a first-year allowance before selling.
  • There is no fixed time limit, but pooling must occur in a period in which the seller was treated as owning the fixtures.
  • The seller does not have to claim writing-down allowances, but the expenditure must appear in the pool.

The fixed value requirement (Section 198 election)

  • The buyer and seller must agree on the part of the purchase price that relates to fixtures.
  • This is usually done through a joint election under section 198 of the Capital Allowances Act 2001.
  • The election must be made within two years of completion, or the parties may have to ask the First-tier Tribunal to set the value.

If both conditions are not met, the legislation can treat the buyer’s qualifying expenditure on fixtures as nil. That can permanently remove allowances for the buyer and all later owners. 

CPSE.1 and practical steps for buyers

In most UK transactions, the buyer’s solicitor will issue CPSE.1 enquiries. The current version (4.0) places capital allowances in Section 33, which asks: 

  • Whether the seller has claimed capital allowances
  • Whether expenditure has been pooled
  • Whether there are existing elections with previous owners
  • Whether the seller is willing to enter a new Section 198 election

In practice, buyers should:

  • Ask for detailed information about past claims and fixtures
  • Involve a specialist accountant early, not just the solicitor
  • Insist that pooling and fixed value clauses appear clearly in the contract
  • Obtain any SBA allowance statement where applicable

Replies to CPSE.1 are often incomplete or poorly drafted. Buyers who accept vague responses risk losing substantial tax relief. 

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Capital allowances while you own, refurbish or fit out a building

Once you own a commercial property, capital allowances planning should be part of every major spend.

Good practice includes:

  • Reviewing every refurbishment, extension and fit-out for qualifying expenditure
  • Keeping a breakdown of build costs split between structure, plant, fixtures and professional fees
  • Using quantity surveyors and tax specialists together on complex projects, where needed
  • Choosing specification and design options that increase qualifying plant and machinery where appropriate
  • Recording dates of installation, so that you can match expenditure to the correct allowance regime

For companies, full expensing and the 50% allowance can be very attractive when planning large projects over the next few years, since they create a significant front-loaded deduction compared with standard WDAs. 

Capital allowances when selling a commercial property

When you sell, capital allowances still matter. They affect both your tax position and the buyer’s.

Key points for sellers:

  • You should know what fixtures have been pooled and what allowances you have claimed.
  • You will normally want the fixture value for plant and machinery to be low, often £1 for each pool, to avoid a large balancing charge.
  • If you have not claimed on all fixtures, there may still be an opportunity to pool and claim before the sale, subject to commercial agreement. 
  • For SBA, you must provide an allowance statement to the purchaser. Your SBA claims stop at sale and the buyer continues them. These claims can increase the capital gain on sale, because they reduce the base cost for CGT.

Thoughtful handling of elections, marketing materials, and CPSE replies can make the asset more attractive while still protecting your tax position.

Historic and missed claims

Many owners of commercial property now enquire about the possibility of including older expenses in a capital allowances claim.

Current practice and guidance show:

  • There is no absolute time bar on bringing qualifying expenditure into a pool, provided the asset still exists and still belongs to the taxpayer for qualifying purposes. 
  • Claims must be made through tax returns, and there are time limits on amending those returns. Often, missed expenditure is introduced in the current period, and relief is taken as WDAs going forward rather than by reopening many years.
  • Historic purchases before the 2012 and 2014 rule changes can still give value, but the pooling and fixed value rules may restrict claims where the property has changed hands since.

HMRC and professional bodies have observed that claims are still widely undervalued, particularly for:

  • Older properties with partial records
  • Portfolios that have grown over time
  • Businesses that never involved capital allowances specialists at purchase or during refurbishment

Risk areas and HMRC scrutiny

Recent HMRC communications and professional commentary highlight several risk areas:

  • Over-reliance on rough percentage apportionments without evidence
  • Double claims where the same item is treated in more than one pool or regime
  • Claims made by buyers who have not satisfied the pooling and fixed value conditions
  • Poor quality Section 198 elections or missing elections
  • Weak records to support valuations and cost breakdowns

HMRC expects businesses to keep clear records, use realistic valuations and apply the legislation correctly. Where there is a dispute over treatment or valuation, HMRC can challenge and, in serious cases, raise penalties.

Capital allowances support from Apex Accountants

At Apex Accountants we provide a specialist capital allowances service for commercial property owners, investors and developers across the UK.

Our work typically covers:

  • Reviewing property purchases, both past and planned, to identify missed and future capital allowances
  • Analysing construction, refurbishment and fit-out projects to separate qualifying plant, fixtures and structural costs
  • Advising on contract wording, CPSE replies and Section 198 elections for both buyers and sellers
  • Liaising with surveyors, solicitors and in-house teams so that technical details, valuations and tax rules line up
  • Preparing detailed capital allowance computations and supporting schedules for submission with tax returns
  • Assessing eligibility for AIA, full expensing, 50% allowances and SBA on current and upcoming projects
  • Supporting businesses during HMRC enquiries, including responses, evidence gathering and technical arguments
  • Building internal processes for clients with property portfolios so that allowances are picked up year after year

Our aim is simple. We help you identify the tax relief that is already sitting inside your building and bring it into your tax calculations in a careful, compliant and commercially focused way.

Conclusion

Commercial property capital allowances are no longer a niche topic. They affect almost every commercial building in the UK and can be worth a significant slice of the purchase price or build cost.

In 2025-2026, the stakes are higher:

  • Full expensing and improved first-year allowances offer strong up-front relief for companies. 
  • The fixtures rules mean buyers can lose relief permanently if pooling and fixed value requirements are not met.
  • HMRC has signalled closer attention to capital allowance claims and common errors.

For commercial property owners, the message is clear. You should treat capital allowances as a core part of every acquisition, refurbishment and sale. That means:

  • Checking CPSE replies and contracts with a tax lens
  • Recording costs and assets in enough detail to support long-term claims
  • Reviewing older properties for missed allowances where fixtures still exist
  • Taking professional advice rather than relying on rough rules of thumb

If you would like Apex Accountants to review your property portfolio or a specific transaction, we can help you assess the potential tax savings, strengthen your documentation and prepare robust claims.

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Frequently Asked Questions On Capital Allowances For Commercial Property

Can I claim capital allowances if I bought the commercial property years ago?

Often yes, as long as you still own the qualifying assets and, for fixtures in second-hand property, the pooling and fixed value rules have not shut down the claim. Relief may come through WDAs in current and future periods rather than by reopening old returns. 

Do I need invoices for every item to claim capital allowances?

Detailed invoices help, but there are other ways to support a claim. Cost breakdowns, contractor summaries, valuations and surveyor reports can all be used to allocate expenditure between structure and plant. HMRC will expect any apportionment to be reasonable and backed by evidence. 

Can I claim capital allowances on a rented or leased commercial building?

Yes, but usually only on the expenditure you incur yourself. For example, you may claim on your own fit-out and equipment. The landlord and tenant often have separate entitlement depending on who paid for which assets and who uses them for a qualifying activity. 

What is the difference between chattels and fixtures for capital allowances?

Chattels are moveable items, such as loose furniture or equipment. Fixtures are plant and machinery that is fixed to the building. Chattels are dealt with through a just and reasonable split of the purchase price. Fixtures within a property are subject to the pooling and fixed value rules, which are much stricter. 

How do capital allowances interact with capital gains tax when I sell?

Plant and machinery allowances do not usually change the gain on a property sale, although there can be balancing charges. SBA is different. Claims under SBA reduce the CGT base cost, so the gain on disposal is higher unless other reliefs apply. 

What happens if the seller will not sign a Section 198 election?

This is a commercial negotiation point. Without an election, and if the new fixtures rules apply, the buyer may have to involve the Tribunal or risk a nil qualifying value. Buyers should address this early and consider price, deal structure and professional advice before exchange. 

Can I use full expensing and AIA on the same commercial property project?

Yes, but you need to plan the order and allocation. Companies tend to use full expensing for qualifying main-rate plant not covered by AIA or where they want to preserve AIA for other assets. The best mix depends on the level of spend and the business structure. 

Are furnished holiday lets still relevant for capital allowances?

 Where a property meets the furnished holiday let conditions, there may be scope for plant and machinery allowances on fixtures and equipment. The detailed rules and wider tax treatment of FHLs are under active policy review, so professional advice is essential before relying on this area. 

What records should I keep to support a capital allowances claim?

Keep purchase contracts, CPSE replies, Section 198 elections, invoices, contractor breakdowns, drawings, valuations and any SBA statements. These documents will help show what you bought, when you bought it, how much you paid and how the cost splits between plant, fixtures and structure. 

When should I involve Apex Accountants in a property transaction?

The best time is before you exchange contracts or commit to a major project. Early advice means the sale contract, elections, CPSE replies and cost coding can all reflect capital allowances from the start, which reduces risk and often increases the value of your claim.

Capital Allowances on Location Equipment and Vehicles

Posted on by Maliha Javaid

Managing location shoots often means investing heavily in specialist equipment and transport. From camera rigs and lighting towers to vans and temporary power units, these costs add up quickly. Capital allowances on location equipment and vehicles help production companies offset investment against taxable profits, delivering real savings and releasing cash flow when needed. At Apex Accountants, we work closely with businesses in the creative and commercial sectors to secure the maximum benefit from capital allowances. With detailed knowledge of industry-specific expenses—such as drone licensing, generator installations, and crew transport—we claim every eligible pound for our clients.

This article explains how tax relief on location equipment and vehicles applies in practice. We cover what qualifies, the types of allowances available, numerical examples, case studies, and practical tips to help production companies improve their financial position.

What qualifies for relief?

Production work often involves high-value equipment and transport. Eligible assets typically include:

  • Cameras, rigs, and sound gear – core filming equipment.
  • Lighting and temporary power – including generators and towers.
  • Drones – with licensing and modifications capitalised alongside purchase costs.
  • Vehicles – vans, minibuses, and lorries for transporting crew and kit.
  • IT hardware – laptops, on-site editing systems, and storage drives.

Businesses can only claim assets they own and use for work, while hire charges and private use remain excluded.

Examples of allowances in practice

  • Annual Investment Allowance (AIA): If a production company spends £250,000 on new camera rigs, the AIA can give full relief in year one. At a 19% corporation tax rate, that saves £47,500 immediately.
  • Cars and low-emission vehicles: Buying an electric crew car worth £35,000 could qualify for a 100% first-year allowance, cutting tax by £6,650 at 19%.
  • Writing Down Allowances (WDA): A diesel van not qualifying for full AIA relief might be written down at 18% annually. For a £20,000 van, the first-year deduction would be £3,600.

Case Study: Location Equipment and Vehicles

At Apex Accountants, we recently worked with a UK film production company preparing for a major outdoor shoot. They invested in two location vans (£50,000), portable generators (£20,000), and specialist camera rigs (£60,000).

We structured the claims so the entire £130,000 spend qualified under the Annual Investment Allowance. This delivered a £24,700 tax saving in the first year at the 19% corporation tax rate.

By securing full relief upfront, the production company released vital cash flow to cover crew wages and on-site logistics. Without proper planning, several years would have been required to write off a significant portion of this expenditure. Our advice ensured they benefited immediately, aligning tax relief on location equipment and vehicles with project deadlines.

Practical tips for production companies

  • Plan purchases before year-end to fully use the £1 million AIA limit.
  • Stagger large investments across tax years to maximise available allowances.
  • Prioritise low-emission crew vehicles for higher or immediate relief.
  • Track incidental costs – delivery, installation, and modifications can all be added to the capitalised cost.
  • Keep detailed logs to show assets are used exclusively for business.
  • Use the Writing Down Allowance on vehicles and equipment when assets exceed AIA limits or fall into long-life categories.

Industry-Specific Quirks in Capital Allowances on Location Equipment and Vehicles

Production companies face unique expenses. For example, temporary site power units, generator installations, and drone licensing costs can all be capitalised. Many businesses miss these, leaving money unclaimed.

How Apex Accountants help

At Apex Accountants, we provide tailored support to production companies investing in equipment and vehicles. Our team reviews purchase records, supplier invoices, and usage logs to identify every cost that qualifies for capital allowances. We apply the right mix of annual investment allowance, writing down allowance on vehicles and equipment, and first-year allowance to maximise tax savings.

We also advise on the timing and structure of purchases, helping businesses align claims with project deadlines and cash flow needs. Whether it’s vans for transport, drones for aerial shots, or temporary power units for remote locations, we ensure nothing is overlooked.

By working with us, production companies benefit from immediate relief where possible, reduced corporation tax liabilities, and stronger cash flow for reinvestment in new projects.

Contact Apex Accountants today to discuss how capital allowances on location equipment and vehicles can support your production business.

How Capital Allowances For M&E Companies Help Reduce Tax Bills

Posted on by Rida Ahmed

Mechanical and Electrical (M&E) companies invest heavily in equipment, tools, and technology to deliver projects on time and to specification. These costs often place significant pressure on cash flow and profitability. At Apex Accountants, we specialise in helping M&E firms manage these financial pressures through capital allowances. Our expertise ensures that companies claim the full relief available and reduce their corporation tax liabilities. This article explains how capital allowances for M&E companies work, the specific types available to M&E firms, practical examples of tax savings, and how proper planning can turn major purchases into valuable tax benefits.

What Capital Allowances For M&E Companies Cover

Capital allowances apply to capital expenditure on business assets. For M&E firms, common qualifying items include:

  • HVAC systems, pumps, and ducting.
  • Electrical control panels and cabling.
  • Cranes, diggers, and commercial vans.
  • Specialist tools and laser measurement devices.
  • Computers, servers, and cloud-linked IT equipment.

Effective use of these allowances provides significant tax relief for M&E companies, improving cash flow while reducing overall liabilities.

Main Allowances For M&E Firms

  • Annual Investment Allowance (AIA): Up to £1 million can be claimed at 100% in the year of purchase. This is often used for large equipment or vehicles.
  • First-Year Allowances (FYA): 100% relief applies to approved energy-saving and low-carbon assets. Examples include LED lighting, high-efficiency motors, or water-saving technology.
  • Writing Down Allowances (WDA): Used when costs exceed AIA. Relief is set at 18% for general assets and 6% for long-life or integral features.
  • Structures and Buildings Allowance (SBA): Provides 3% annual relief on the cost of new or refurbished commercial premises used by the firm.

These allowances often deliver significant corporation tax savings for engineering firms, particularly those with high investment in machinery and specialist equipment.

Tax Saving in Practice

A mechanical engineering company buys £350,000 of new fabrication machinery. By using the AIA, the entire cost is deducted in year one. If pre-tax profit was £950,000, the taxable profit drops to £600,000. At a 25% corporation tax rate, this creates an £87,500 saving.

If the company also spends £120,000 on approved low-carbon technology, the FYA gives an additional £120,000 deduction, reducing tax by a further £30,000. Combined, the firm keeps £117,500 in cash that would otherwise go to HMRC.

Why Records Matter

HMRC requires clear evidence of capital expenditure. M&E firms should store invoices, delivery notes, contracts, and asset registers. Good documentation supports accurate claims and secures corporation tax savings for engineering firms during HMRC reviews.

Why Choose Apex Accountants for Capital Allowances

We analyse expenditure line by line and identify assets often missed, including cabling, integral building features, and mixed-use vehicles. Our team prepares claims in line with HMRC rules to reduce enquiry risk. By planning capital purchases around year-end, we help M&E firms claim relief at the right time for maximum efficiency.

Capital allowances reduce corporation tax for M&E companies and improve cash flow. With specialist advice from Apex Accountants, businesses gain immediate tax relief for M&E companies and reinvest savings into growth.

Contact Apex Accountants today to discuss your capital allowance claim.

Structures and Buildings Allowance qualifying expenditure

Posted on by Rana Zubair

The Structures and Buildings Allowances (SBA) facilitates tax relief for qualifying capital expenditure on new non-residential structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures.

The relief was introduced in October 2018 at an annual capital allowance rate of 2% on a straight-line basis. From 1 April 2020, the annual rate was increased to 3% and the corresponding period reduced to 33 and one third years.

HMRC’s internal manuals consider the meaning of qualifying capital expenditure for this tax relief. The manuals state that:

The amount of qualifying capital expenditure will depend upon whether the person who first uses the building constructed it themselves, or they acquired it unused from a developer. That amount is determined either directly from expenditure incurred on the construction of a building, or by comparing those costs with the sum paid for the relevant interest in the building.

From the total ‘qualifying expenditure’, any amounts that qualify for other capital allowances or are specifically disallowed must be removed. The qualifying expenditure does not change, even when the ownership of the building changes, there are exceptions relating to VAT liabilities and rebates.

130% tax relief for companies – Apex Accountants & Tax Services

Posted on by Rana Zubair

Are you thinking of investing in new plant or other equipment? Remember that the super-deduction offering 130% first-year tax relief is available to companies until March 2023.

The super-deduction tax break was introduced on 1 April 2021 and allows companies to deduct 130% of the cost of any qualifying investment on most new plant and equipment that would ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 a business invests they can reduce their tax bill by up to 25p. The temporary tax relief applies on qualifying capital asset investments until 31 March 2023. 

The super-deduction is designed to help companies finance expansion in the wake of the coronavirus pandemic and help to drive growth. 

In addition, an enhanced first year allowance of 50% on qualifying special rate assets has also been introduced for expenditure within the same period. This includes most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances. 

The measures have effect in relation to qualifying expenditure from 1 April 2021, and exclude expenditure incurred on contracts entered into prior to Budget Day, 3 March 2021.

Source: HM Treasury Tue, 10 Aug 2021 00:00:00 +0100

Décor and plant and machinery allowances

Posted on by Rana Zubair

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.

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. 

An interesting case dating back to 1982 helps to confirm this point of view. The decided case concerns a company that spent money on décor items such as light fittings and wiring as well as decorative items such as wall plaques, tapestries, murals, prints and sculptures. It was accepted that electric wiring was part of the fabric of the building but not the other decorative assets. 

HMRC’s internal guidance states that inspectors should only accept that items of decor are plant if the taxpayer can show that:

  • the trade involves the creation of atmosphere/ambience and in effect the sale of that ambience to its customers; and
  • the items on which plant or machinery allowances are claimed were specially chosen to create the atmosphere that the taxpayer is trying to sell.

For example, a painting on an accountant’s office wall that is owned by the accountant is not plant because selling atmosphere is not part of an accountant’s business.

Source: HM Revenue & Customs Tue, 03 Aug 2021 00:00:00 +0100

Tax when you sell an asset

Posted on by Rana Zubair

There are special rules that must be followed when you sell an asset on which capital allowances have been claimed. Capital allowances is the term used to describe the tax relief businesses can claim on certain capital expenditure and thereby reduce the amount of taxable profits.

The sales value is usually the sales price. If you gave the asset away, stopped using the asset or sold it for less than it was worth then the market value should be used.

If you originally claimed 100% tax relief on the item, the business is required to add back the difference to their taxable profits. This is known as a balancing charge. A balancing charge is effectively a way of ensuring that a business does not claim more tax relief than they were entitled to on the purchase of a business asset. The balancing charge works in the opposite way to a capital allowance and increases the amount of profit on which tax is due.

If you originally used writing down allowances, you may have a balancing allowance or a balancing charge.

There are special rules for dealing with any balancing charges or balancing allowances where a business ceases to trade.

Source: HM Revenue & Customs Wed, 02 Jun 2021 00:00:00 +0100

Allowance For Fixed Asset (Annual Investment Allowance) Extended

Posted on by Rana Zubair

There is good news for those businesses who are looking to expand their business and invest in the assets of their companies. The government has announced that the temporary Annual Investment Allowance (AIA) cap will be extended for a further 12 months until 1 January 2022.

Annual Investment Allowance (AIA) could be claimed on plant and machinery, Integral features, and fixtures

Please visit our Tax Services page to know about our tax services.

Plant and machinery include:

  • items that you keep to use in your business, including cars
  • costs of demolishing plant and machinery
  • parts of a building considered integral, known as ‘integral features’
  • some fixtures, for example, fitted kitchens or bathroom suites
  • alterations to a building to install other plant and machinery – this does not include repairs
  • Claim repairs as business expenses if you’re a sole trader or partner – deduct from your profits as a business cost if you’re a limited company.

Integral features include:

  • lifts, escalators, and moving walkways
  • space and water heating systems
  • air-conditioning and air cooling systems
  • hot and cold water systems (but not toilet and kitchen facilities)
  • electrical systems, including lighting systems
  • external solar shading

Fixtures include:

  • fitted kitchens
  • bathroom suites
  • fire alarm and CCTV systems

The government says that this move is intended to boost confidence as companies look to weather the pandemic and plan for the future. This should also encourage investment in qualifying plants and machinery over the next 12 months.

The AIA allows for a 100% tax deduction on qualifying expenditure on plant and machinery to be deducted from your profits before tax. The relief is normally capped at £200,000 per annum but was temporarily increased to £1 million for a 2-year period from 1 January 2019 to 31 December 2020.

This increased temporary limit is a generous allowance and should cover the annual spending of most small and medium-sized businesses. The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures, and computers. The AIA does not apply to cars.

The extension in the temporary limit means that businesses thinking of incurring large items of capital expenditure will now have additional time to consider their options during these uncertain times. There are complex transitional rules so the timing of any purchase should be carefully considered.

If you would like to know more about it, feel free to contact us.

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