What is a long-life asset for capital allowances? What allowances can be claimed on long-life assets?
This is a freeview 'At a glance' guide to long-life assets.
At a glance
- An asset which is plant or machinery is a long-life asset for capital allowances purposes if its expected useful economic life is at least 25 years.
- When a long-life asset is pooled, it is added to the special rate pool with Writing-Down Allowances (WDA) of 6% (from April 2019, previously 8%) per year.
- As an alternative to pooling, the Annual Investment Allowance (AIA) may be claimed in many cases, instead of the WDA in the year of acquisition.
- For expenditure by companies on new assets between 1 April 2021 and 31 March 2023, the 'SR Allowance' First Year Allowance may apply which gives a 50% allowance.
- For expenditure by companies on new assets after 1 April 2023, the replacement 50% First Year Allowance may apply.
- Estimates of life expectancy are taken from new. If an asset is purchased second hand the previous owner's use of the asset is taken into account.
- Once an asset has been treated as a long-life asset, it cannot later be changed even if sold to a new owner.
- Expenditure on a long-life asset is only treated as such where the total expenditure on long-life assets in the period exceeds the monetary limit.
- The monetary limit is £100,000 per annum, adjusted accordingly for accounting periods greater or less than 12 months.
- For a company, the limit is also proportionately reduced where there are Associated companies in the period.
- The monetary limit exception does not apply to certain expenditure (e.g. plant and machinery acquired for leasing) or to partnerships with a corporate partner.
- Long-life assets may be Fixtures or Integral features (unless they are installed within a dwelling-house, hotel, office, retail shop or showroom).
- Since April 2012 solar panels have been treated as long-life assets.
The following are excluded from being long-life asset expenditure:
- Plant and machinery which is:
- A fixture in, or is provided for use in, a building used wholly or mainly as a Dwelling-house, hotel, office, retail shop or showroom.
- For purposes ancillary to a dwelling-house, hotel, office, retail shop or showroom.
- HMRC have confirmed that wholly or mainly is satisfied if at least 75% of the building measured on a reasonable basis, is used for that purpose.
- Cars or Motorcycles.
- Expenditure incurred before 1 January 2011 on the provision of ships of a sea-going kind other than ones which are of a type primarily used for sport or recreation; or are offshore installations.
- Expenditure incurred before 1 January 2011 on the provision of railway assets for use wholly and exclusively in a railway business.
Agreements have been made with particular industry bodies to exclude certain assets from being treated as long-life assets, these include certain aircraft, Greenhouses, water supply, and printing equipment.
Useful guides on this topic
Plant & machinery: Allowances
What are the capital allowances on plant and machinery? How do you calculate them? What are the qualifying activities?
What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building?