Plant and machinery allowances (PMA)

PMA provide tax relief on capital assets such as business equipment qualifying as plant and machinery. Furthermore, there are three main types of PMA as follows:

• First-year allowances (FYA): This allows a full deduction of the costs incurred on certain qualifying capital assets in the form of plant and machinery, during the (first) year the spend was incurred. Hence it is called “first year” allowances.
• Annual investment allowances (AIA): This allows a full deduction up to a certain annual limit in respect of the costs incurred on certain qualifying capital assets in the form of plant and machinery, during the year the spend was incurred. The current annual limit is £1m.
• Writing down allowances (WDA): This allows tax deduction at a reducing balance basis annually. The WDA has two pools or rates which includes the main pool (MP) rate of 18% on assets such as business equipment and furniture. There is also the special rate pool (SRP) of 6% on assets such as heating, ventilation, and air-conditioning systems. Some categories of WDA such as the following exist:
  • Integral features (IF): These relate to lifts, heating, air-conditioning, electrics, lighting, water systems, etc.)
  • Short-life assets (SLA): These relate to assets with useful life of not more than 8 years)
  • Long-life assets (LLA): These relate to assets with useful life of at least 25 years.

The rate of tax deduction on the above categories is MP for SLA claims, and SRP for both IF claims and LLA claims.

Where FYA and AIA does not apply, tax relief on PMA would typically default to WDA.