Main and Special Rate Capital Allowances – how do you clear the pools down?

When Capital Allowances are assessed on commercial property and holiday lets they will be split into 3 categories. We use specialists to make the assessments and they are able to maximise the claims. The categories are:

Annual Investment Allowance

You can only claim AIA in the period you bought the item.

The date you bought it is:

  • when you signed the contract, if payment is due within less than 4 months
  • when payment’s due, if it’s due more than 4 months later

If you buy something under a hire purchase contract you can claim for the payments you have not made yet when you start using the item. You cannot claim on the interest payments.

Since 2019 the AIA has been capped at £1m but that’s more than enough for most businesses.

AIA is not available for partnerships where one of the partners is a company or another partnership.

Main Rate and Special Rate Pools

The 3 types of pool are the:

  • main pool with a rate of 18%
  • special rate pool with a rate of 6%
  • single asset pools with a rate of 18% or 6% depending on the item

Special rate pool

You can claim a lower rate of 6% on:

  • parts of a building considered integral – known as ‘integral features’
  • items with a long life
  • thermal insulation of buildings

Integral features

Integral features are:

  • lifts, escalators and moving walkways
  • space and water heating systems
  • air-conditioning and air cooling systems
  • hot and cold water systems (but not toilet and kitchen facilities)
  • electrical systems, including lighting systems
  • external solar shading

What happens to the Pools if the Asset is disposed of?

The main and special rate pools will continue to qualify for WDAs until the business ceases, even though all the assets in the pool have been sold, transferred or scrapped. When the business ceases there will be a balancing adjustment. This will be either a balancing charge, i.e. taxable amount, if proceeds received for the assets (or their market value if they are not sold) exceed the value of the pool, or a balancing allowance, i.e. extra tax deduction, if the proceeds (or value) are less than the value of the pool. (Indicator FLM)

So you carry on taking 18% or 6% WDA until the business ceases.

If the property is being sold or has been sold and the company is to be wound up, then a balancing allowance of the CA pools can be received in the final accounting period.  Usually, there will be a value attributed to capital allowances via the s198 election in the contract.

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