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What are qualifying activities for capital allowances purposes?

Qualifying activities are:

Expenditure for use in a dwelling house

Expenditure incurred on plant and machinery for use in a dwelling house does not qualify for Plant and machinery allowances.

Prior to April 2016 a wear and tear allowance could be claimed for furnished properties, see Wear and Tear Allowance and renewals basis.

From April 2016 the wear and tear allowance was abolished and Replacement of Domestic Items Relief was introduced instead.

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

A block of flats or a university hall of residence is not a single dwelling house, however a room with basic facilities can itself be treated as a dwelling house.  Capital allowances can be claimed on plant and machinery expenditure in shared areas such as communal hallways, stairwells and lifts. See Dwelling house for capital allowances.

In Hora Tevfik v HMRC [2019] TC07383 the First Tier tribunal denied claims for capital allowances on the communal areas of HMO properties; The claims made were described as relating to communal, common parts, installations and shared areas but with no split between the different elements. Although invited to do so by HMRC, Mr Tevfik did not revise his claims so as to relate to common parts of the buildings only.

Office holders and employees

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

Mixed use assets

Capital allowances can be claimed for assets which are used for qualifying activities and for private purposes, subject to a restriction for the private use which is worked out on any reasonable basis.

Small print

Capital Allowances Act (CAA) 2001 section 15

Updates

22 March 2016 minor changes made, links updated, small print section added.