Capital allowances (UK tax depreciation)

Capital Allowances are relief as deductions available to a business on the capital assets that are purchased and used for that taxpayer’s activities. Capital allowances are often thought of as the tax equivalent of depreciation.

The UK capital allowances regime provides tax relief (against taxable income) for capital expenditure in a consistent manner across businesses. In some cases, full relief may be available on the purchase of an asset, whilst for other expenditure tax relief may be received over many years or decades. Allowances are provided on a reducing balance, or a straight line basis, or a full 100% first year allowances (full expensing). Understanding the availability and the appropriate capital allowances to claim in your business can be complex.

Relief is available for a range of capital expenditure types including: plant and machinery, structures and buildings, fixtures and long life assets (special rate pool assets). Different capital allowance rules apply to each type of qualifying expenditure.

A permanent full expensing first year allowance is available from 1 April 2023 This effectively replaces the super-deduction allowances which ceased on 31 March 2023.

How PwC can assist you

• Addressing and quantifying the impact of capital allowances leveraging PwC’s experience
• Preparation of claims including full disclosure of the relevant technical criteria to manage your tax risk position
• Considering your technical entitlement to make claims, considering the various nuances of the law
• Utilising PwC technology to assess the impact on your cash position, NPV calculations and other tax matters.
• Model the impacts of capital allowances and how they impact your wider tax profile (i.e. restriction on losses).
• Assistance with tracking assets / projects for disposal purposes and the impact of any clawback
• Current and historical tax reviews making sure you are benefitting from your full entitlement
• Expert technical transaction support focused on value for buyers and sellers of property.
• Consider land remediation relief availability.
• Focus on high value reliefs such as Research and Development Allowances (“RDAs”) and Full expensing.