What are qualifying activities for capital allowances purposes?

Qualifying activities are:

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

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.

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.

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