Capital allowances in the care business

Within this article I explain the benefits of capital allowances when incurring property expenditure in a care business. Please note that this relates to businesses who pay corporation or income tax and does not apply to organisations not within the charge to tax such as not for profit providers, charities and local authorities.

Capital allowances were originally designed to encourage asset investment and provide a tax relief for asset depreciation. They are available when you incur capital expenditure, being expenditure on creating an asset of endurable worth. This can relate to a purchase (see later), a new development, an extension, or the improvement of an existing asset. A lot of property expenditure falls into these categories and that expenditure will qualify for tax allowances within various claimable categories. These categories are generally meant to provide tax relief over a number of years in relation to the expected useful life of the asset. The basic categories are:

General plant & machinery (also known as main pool plant and machinery) — generally allowable at 18 per cent per annum on a reducing balance basis. Qualifying items will be those that can be defined as plant and machinery with reference to the legislation (the Capital Allowances Act 2001), case law and practice, but do not fall into any of the category of integral features (see below). Generally, in this area, items such as sanitary installations, furniture, fittings and equipment, fire alarm and call alarm systems, hoists, security equipment, and firefighting installations will qualify (to name but a few).