Capital allowances write off the cost of capital assets against taxable profits. They are used instead of the depreciation charge in the accounts, which is not allowable as a tax deduction.

* Long Life Assets apply to some businesses spending more than £100,000 p.a. on certain assets with a useful life of 25 years or more.

Plant and Machinery FYA
For small businesses: FYAs of 50% is available (to 31/3/08 for companies). A small firm is defined as a business that satisfies any two of the following conditions: (a) turnover £5,600,000 or less (b) assets £2,800,000 or less (c) not more than 50 employees.

For medium-sized businesses: FYAs of 40%. A medium firm is defined as a business that satisfies any two of the following conditions: (a) turnover £22,800,000 or less (b) assets £11,400,000 or less (c) not more than 250 employees.

Intangibe Assets
This includes goodwill and other intagible property. For companies this will usually be the amount of amortisation as per the accounts or a fixed rate of 4% p.a. can be elected for.