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Tax relief on company assets

Where a company acquires assets, relief is not given for the full cost of the asset against the company's profit for the year, as it would if they were revenue expenses, and instead relief is given in the form of capital allowances.

Capital allowances for plant and machinery take the form of writing down allowance (WDA), although in the year that the company buys an asset it may be eligible for first year allowances (FYA), which are at a higher rate that WDAs. The rates change from year to year and are announced in the Budget. The rates of FYA change regularly and depend on the type of asset purchased. WDA is claimed at the rate of 25% per annum on a reducing balance basis.

Cars are treated slightly differently. FYAs are not available, WDAs only are available. These are calculated at the rate of 25% per annum on a reducing balance basis, except that for �expensive� cars (with a cost of more than �12,000), WDA is limited to �3,000 per annum.

Allowances (IBAs) are also available for the cost of, or qualifying expenditure on, industrial buildings at the rate of 4% per annum, calculated on a straight line basis. If the property is in an enterprise zone, the definition of an industrial building includes commercial property and an initial allowance of up to 100% can be claimed with 25% IBA on any balance.

No allowance is available for the cost of land buildings, unless they are industrial buildings. When the land and buildings are eventually sold, any capital gain will be taxed, and relief is available for capital losses.