Nichola Ross Martin's Tax Consultancy

What are qualifying activities for capital allowances purposes?

Qualifying activities are:

• A trade
• A property business (UK or overseas)
• A profession or vocation
• An employment
• Special leasing of plant and machinery
• Managing the investments of a company with investment business
• A concern in mines or transport undertakings

but only the extent that the profits or gains from the above activities are or would be taxable.

Property letting

Expenditure incurred on plant and machinery for use in a dwelling house, does not qualify for plant and machinery allowances if the qualifying activity consists of:

• An ordinary property business
• An overseas property business or
• Special leasing of plant and machinery

This is because there is a specific exclusion in s35 CAA 2001.

As an alternative a wear and tear, or replacement cost basis may be claimed instead. A

Expenditure on plant and machiney for use in a qualifying furnished holiday letting activity does qualify for capital allowances.

A block of flats is not a single dwelling house, however a room with basic facilities can be treated as a dwelling house. In which case it can be possible to claim capital allowances on plant expenditure in shared areas such as lifts, see Capital allowances: HMRC clarifies meaning of dwelling house  

Mixed use assets

When expenditure is incurred for the purposes of a trade, but there is also private use capital allowances can be claimed ensuring there is a restriction, worked out on any reasonable basis for the private use.

Capital allowances and employees

Where the qualifying activity is an employment (or office), no capital allowances may be claimed on expenditure on motor vehicles and cycles.