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Legal Terms - capital allowance
A tax deduction for the cost of purchasing specific things to be used in a business. These assets encompass machinery and plant, industrial buildings, mines and oil wells, energy-saving equipment, and scientific equipment. For all other forms of capital investment, both the initial cost and the decrease in value over time cannot be deducted from taxable income. An annual investment allowance of 100% is provided for expenses up to a predetermined amount, which varies on a yearly basis. Spending more than this amount will result in a reduction in the rate of the writing-down allowed.
To be eligible for a capital allowance, the individual must own the asset as a result of a payment (as stated in Section 167-70 of the Capital Allowances Act 2002). The courts have construed the term "belong" by considering principles of property law. In the case of Stokes v Costain Property Investment Ltd [1984] 1 All ER 849, the Court of Appeal determined that the tenant could not avail themselves of capital allowances for a lift they had erected. This was because, according to established landlord principles, the act of building the lift transferred ownership of the lift to the landlord. The case of Melluish v BMI(3) Ltd [1995] 4 All ER 453 (CA) also reached a similar judgment regarding fixtures.
A tax deduction for the cost of purchasing specific things to be used in a business. These assets encompass machinery and plant, industrial buildings, mines and oil wells, energy-saving equipment, and scientific equipment. For all other forms of capital investment, both the initial cost and the decrease in value over time cannot be deducted from taxable income. An annual investment allowance of 100% is provided for expenses up to a predetermined amount, which varies on a yearly basis. Spending more than this amount will result in a reduction in the rate of the writing-down allowed.
To be eligible for a capital allowance, the individual must own the asset as a result of a payment (as stated in Section 167-70 of the Capital Allowances Act 2002). The courts have construed the term "belong" by considering principles of property law. In the case of Stokes v Costain Property Investment Ltd [1984] 1 All ER 849, the Court of Appeal determined that the tenant could not avail themselves of capital allowances for a lift they had erected. This was because, according to established landlord principles, the act of building the lift transferred ownership of the lift to the landlord. The case of Melluish v BMI(3) Ltd [1995] 4 All ER 453 (CA) also reached a similar judgment regarding fixtures.
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