ABSTRACT
Capital Allowances provide tax relief by prescribing a statutory rate of depreciation for tax purposes in place of that used for accounting purposes. They are utilized by government to provide an incentive to invest in capital equipment, including assets within commercial property, by allowing the majority of taxpayers a deduction from taxable profits for certain types of capital expenditure, thereby reducing or deferring tax liabilities. The primary legislation is contained in the Capital Allowances Act 2001. Major changes to the system were introduced in 2008 and 2014 announced affecting the treatment of plant and machinery allowances. Various legislative changes and case law precedents in recent years have introduced major changes to the availability of Capital Allowances for property expenditure. From April 2008, expenditure incurred on the installation of thermal insulation to existing buildings qualifies as plant and machinery which is available on a reducing balance basis at 8" per annum.
