Jurisdiction(s):
United Kingdom

Key definition

Capital allowance definition

What does Capital allowance mean? A capital allowance is tax relief that lets a business deduct qualifying capital expenditure from trading profits when computing corporation tax (companies) or income tax (sole traders and partnerships), since capital costs are not normally revenue‑deductible. In practice it is a statutory regime: in the UK (including England & Wales, Scotland and Northern Ireland) under the Capital Allowances Act 2001 and Finance Acts; in Ireland under the Taxes Consolidation Act 1997. Key features include: - Relief for plant and machinery (including integral features and most equipment), certain cars, and structures and buildings. - Mechanisms such as Annual Investment Allowance (AIA), writing‑down allowances...

UK Capital Allowances: Capital/Revenue Distinction, Enduring Benefit, Entirety, Nearest Modern Equivalent, Integral Features and the Law Shipping Principle

Published by a LexisNexis Tax expert

Practice notes

What are capital allowances?

Capital allowances provide tax relief for certain, though not all, items of capital expenditure. They function as a standardised, tax‑deductible stand‑in for depreciation or amortisation, broadly intended to deliver relief that mirrors the economic life of business assets. For income or corporation tax returns, accounting depreciation is not deductible; capital allowances are claimed instead. Eligibility is restricted and some assets are excluded. For example, spending on land does not qualify. The most frequently encountered allowances are for plant and machinery. The scope of plant and machinery for capital allowance purposes is set out in Practice Note: Plant and machinery allowances—definition of plant and machinery. Since October 2018, relief has also been available for specified expenditure on structures and buildings, or parts of them, where their construction is treated as commencing on or after 29 October 2018; see Practice Note: Structures and buildings allowances. Capital allowances may grant full relief at the time the cost is incurred, but relief is often apportioned across several years, using a range of allowance types applied at differing rates. The timing and rate of relief depend on the specific allowance claimed...

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Martin Wilson

A former Chartered Accountant, now retired, Martin is the author of more than a dozen books on capital allowances, including Bloomsbury Professional's Capital Allowances: Transactions and Planning. Martin co-founded The Capital Allowances Partnership Limited after 15 years with leading accounting firms, where he headed up the specialist capital allowances practice. He has personally advised some of the UK's leading companies, as well as a myriad of private investors, both in the UK and overseas....

Steven Bone

Gateley Legal

Steven is a tax-qualified chartered surveyor. He has specialised in capital allowances for more than 25 years, and more recently land remediation relief and R&D tax incentives. In his role as director at Gateley Capitus, Steven works with businesses that are buying, building or refurbishing commercial property, cleaning-up contaminated land and buildings or undertaking R&D activity to help them pay the right amount of tax by optimising the tax reliefs available to them.Prior to joining Gateley Capitus, Steven held senior roles in the Big 4, specialist boutique and national mid-tier accountancy firms. He is a fellow of the Royal Institution of Chartered Surveyors (RICS) and the Association of Taxation Technicians.Alongside daily practice, Steven is a tax incentives writer and speaker for property investment and innovation activity. ...

Web page updated on 21/05/2026

Popular documents

Using the Judicial College Guidelines to assess general damages in personal injury claims

When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...

Tomlin orders in England and Wales: CPR guidance on drafting, confidentiality, approval, variation, enforcement, limitation, CCA issues, court-specific requirements, sample wording and precedents

This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...

Precedent: Deed of Surrender of Lease with Optional Premium, Settlement and Release, Landlord, Mortgagee and Guarantor Consents, Reimbursement and HM Land Registry Provisions (England and Wales)

Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...

Precedent Statutory Declaration: Standard Wording under the Statutory Declarations Act 1835

I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...