Plant and machinery allowances

What records should you keep to keep right side of the rules?

HMRC is publicising common areas of error where businesses trip up when they claim plant and machinery allowances. It’s not new guidance, just a nudge to help businesses keep on the right side of the rules, and it’s intended to be read alongside other HMRC guidance.

The importance of good record keeping is an area particularly highlighted. Good records not only help ensure that claims are accurate; if HMRC comes back with questions, it should also mean any issues are resolved more speedily.

HMRC recommends that a record is kept of capital allowances claimed, either for the specific asset or as part of a pool. In particular, it is suggested that there are records of all acquisitions and disposals, including: the name of the asset; the date of acquisition; acquisition cost; date of disposal; disposal receipts or value on disposal. It is also suggested that it is useful to record how the plant or machinery was acquired: whether purchased, received as a gift, or already in use for another purpose.

Where an asset is not just used for the qualifying (business) activity, but also for other purposes, records should be good enough to show how use is split between the two. This is particularly relevant for vehicles. The key differentiation here is between business and private mileage.

Claims for capital allowances are usually made in the tax return and it should be remembered that supporting records should normally be kept for five years from the normal filing date for the tax return. Incorporated businesses will usually need to keep records supporting their returns for six years from the end of the relevant accounting period. Records may need to be kept for longer where HMRC opens an enquiry.

Plant and machinery claims are a complex area, and getting record keeping right is just the tip of the iceberg. For help and advice, please get in touch.