Plant and Machinery allowance is available to persons engaged in qualifying activities, which is very wide in this case. Trade, profession, vocation, office, employment and Schedule A business (property rentals etc) are all qualifying activities, for example. Persons carrying on these activities can claim capital allowances as an expense while computing their taxable income.
The capital allowances are claimed on qualifying expenditure, meaning expenditure incurred for providing plant or machinery for the qualifying activity. Plant and machinery means practically all tangible assets other than computer software, land and buildings. Even fittings incorporated in buildings qualify as plant and machinery subject to certain exemptions.
While you cannot claim capital allowances for the expenditure on buildings (bricks & mortar, for example), you can make such claims for fixtures within the building that are considered plant and machinery. This includes removable fixtures and integral features in the building. Identification and valuation of plant and machinery forming part of a building is a complex issue.
Plant and Machinery Allowances (PMA) can be (Temporary) First Year Allowances (FYA), Annual Investment Allowance (AIA) or Writing Down Allowances (WDA). FYA, recently superseded by AIA, is allowed only under certain circumstances and involves a higher (than WDA) allowance in the year the expenditure was incurred. WDA can be claimed at allowed rates for a number of years on any amount remaining in the expenditure after FYA is claimed.
Each WDA claim reduces the amount on which subsequent WDA claims can be made.
WDA is calculated on “pool” totals; a pool can consist of a single item or several items under a particular class of asset. Pool totals are increased by new asset purchases and reduced by FYA, WDA and disposals of pool assets. The reduced totals are carried forward to future years for subsequent claims.