Flow chart - capital allowances annual investment allowance

Where you purchase plant or machinery for use in your business you are entitled to claim a tax deduction for the cost. This can be spread over many years. However, in a twelve-month period you are entitled claim a tax deduction (capital allowance) for 100% of the cost of assets up to a set amount, known as the annual investment allowance (AIA).

Flow chart

The Flow Chart - Capital Allowances Annual Investment Allowance will help you decide if you are entitled to claim the AIA for the cost of assets.

Definitions for the flow chart:

• Plant or machinery - there is no statutory definition of plant or machinery. In fact, there is no precise definition for tax purposes. There is considerable case law and HMRC commentary on the subject which relies largely on a common sense and practical approach. In brief, machinery is any physical asset which has moving parts while plant is any asset, static and without moving parts, which has a practical function itself or ancillary to an item of machinery, e.g. a lift shaft.

For HMRC guidance on what counts as plant or machinery visit https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca21010