What is an integral feature?

Integral features come under the heading Plant and machinery but like Fixtures have to be considered separately because they are subject to a set different rules and rates of capital allowances.

Exceptionally the Annual Investment Allowance applies to expenditure on both integral features and plant and machinery.

The integral features rules apply to expenditure incurred on or after 1 April 2008 on:

(a) An electrical system (including a lighting system),

(b) A cold water system,

(c) A space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,

(d) A lift, an escalator or a moving walkway,

(e) External solar shading.

(f) Solar panels which were specifically designated as special rate assets from 1 April 2012 for corporation tax and 6 April 2012 for income tax.

Expenditure on the cost or replacement of integral features are subject to a reduced rate of writing down allowance for capital allowances (8% from April 2012).  


Meaning of “replacement”

An integral feature is treated as being replaced where expenditure incurred is more than 50% of the cost of replacing the integral feature.

The effect of this measure is that the replacement expenditure is not deductible against income, instead the cost is capitalised and subject to capital allowances.

The rules link up any additional expenditure in the period of 12 months beginning with the initial expenditure being incurred. If all comes to more than 50% of the cost of replacing the integral feature (worked out as if all the expenditure was incurred at the time the initial expenditure was incurred) the cost is treated as if it is spent on the acquisition of a new asset. 

Example 1:

Polly would like to replace the electrical system in her seaside restaurant.

  • She obtains an estimate from Sunnyside Electrics Ltd, who quote a total figure of £120,000 for the whole job and are recommended by her friend.
  • She decides that she cannot afford this, so requests a separate estimate for replacing the wiring and sockets on the ground floor alone, because this is the floor she is most worried about, following some recent flood damage.
  • Sunnyside Electrics Ltd quote a figure of £58,000 for this floor alone. Although it might have been possible for Polly to have obtained a cheaper estimate for replacing the whole system, for a total of say £100,000, (when £58,000 would have represented more than 50% of that total) this is not relevant.
  • The £120,000 estimate from the recommended experienced electrician was a bona fide arm’s length estimate and there is no need to enquire further.
  • The partial replacement cost represents less than 50% of the total replacement cost and so the integral features provisions do not apply.

Example 2:

  • Joe decides to replace the electrical system in his factory.
  • The cost of replacing the whole system is around £150,000.
  • Joe’s business’s chargeable period ends on 31 December each year. He pays £60,000 towards the new system on 31/12/16 and pays the balance of £90,000 on 30/6/17, after the work is satisfactorily completed.
  • Although Joe’s initial expenditure in his 2016 chargeable period, on beginning to replace this integral feature represented only 40% of the replacement cost, that initial expenditure plus the further expenditure incurred within 12 months (that is, plus the balance incurred in his 2017 chargeable period) represented more than 50% of the replacement cost,
  • The total expenditure is deemed to be capital expenditure, to be allocated to the special rate pool, where it will attract WDAs at 8%.

Small print and Links

Capital allowances: plant and machinery

Fixtures: overview

Legislation: CAA 2001 s33A & 33B