Capital allowances

Question 1

Capital allowances - definition

Answer 1

Replaces depreciation

Deduct capital allowance from adjusted profits to arrive at taxable profits

Question 2

Plant and machinery

Function test

Answer 2

Buildings are not plant (fixed walls, floors, ceilings, windows etc.)

If an asset performs a function in the trade its plant, of it provides setting in which the business is carried out than it is not plant

Question 3

Annual investment allowance

Answer 3

Is given off 100% of the asset up to £1m per year for plant and machinery, integral features, life long assets and private use assets - but not cars