TA1

Tax Allowances

From April 2008 the UK Capital Allowances legislation changed to introduce a two tier Plant & Machinery Allowances (PMAs) regime. Previously PMAs were written down at 25% per annum on a reducing balance basis against taxable profits. Allowances are now available at 20% pa on a reducing balance basis for general plant, while integral features only receive 10% pa on the same basis. Section 33A of the Capital Allowances Act 2001 states;

For the purposes of this section each of the following is an integral feature—

(a) an electrical system (including a lighting system)
(b) a cold water system

(c) a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system

(d) a lift, an escalator or a moving walkway

(e) external solar shading

While the 10% integral features pool on first appearances does seem to be a little unattractive, the inclusion of Electrical systems, Cold water systems and External solar shading does mean the quantum of allowances available will increase on a claim. The inclusion of Electrical systems also means that claims for Lighting will be available as a matter of cause making the Enhanced Capital Allowances (ECAs) scheme more effective. It could be said the prime reason for the reduction in Writing Down Allowances for Plant & Machinery is to encourage the use of more energy or water efficient systems which could attract 100% First Year Allowances under the ECA scheme.