Capital allowances are a form of tax-approved depreciation. Depreciation, as calculated is not an allowable deduction in computing the profits. Instead, relief is given by treating the capital allowances as an expense to be deducted when arriving at the taxable trading profits. This document discusses the various types of capital allowances, the rates of allowances applicable for each type allowances, chargeable periods and so on.
Capital allowances and partnerships
The general rules on which assets qualify for capital allowances ('eligible assets') are explained in the Capital allowances - introduction and Definition of plant and machinery guidance notes.
A partnership can claim capital allowances on eligible assets which are either:
- owned by the partnership, or
- owned by an individual partner and used in a trade carried on by the partnership
Both of these are discussed below.
Owned by the partnership
It is not always clear whether an eligible asset is 'owned' by the partnership. Most partnerships are not legal entities (see the Types of partnership and types of partner guidance note), so some assets may be held on trust for the partnership by individual partners. Factors to consider include whether the asset:
- is held in the name of the partnership
- was invoiced to the partnership, or
- appears in the partnership accounts
Owned by the partner
An asset which is owned by a partner and used by the partnership for its trade can qualify for capital allow-ances. CAA 2001, s 264(1)-(2)