| Relief | Rate | Who can claim | Applies to |
|---|---|---|---|
| Full expensing | 100% first year | Companies | Main-rate plant and machinery |
| 50% first-year allowance | 50% first year | Companies | Special-rate, including integral features |
| Annual Investment Allowance | 100% up to £1m/yr | Companies and unincorporated businesses | Most plant and machinery, including integral features |
| Writing-down allowance | 18% main / 6% special | All | Expenditure beyond the above |
| Structures & Buildings Allowance | 3% straight line | All | Construction of the structure itself |
Integral features
A large share of EPC upgrade work falls into the integral features category, which sits in the special rate pool but is covered by the AIA and the 50% first-year allowance:
- Electrical and lighting systems
- Space and water heating systems
- Ventilation, air cooling and air purification
- Lifts and escalators
- Cold water systems
- External solar shading
The practical point
Allowances are lost when a refurbishment is invoiced as a single lump sum with no breakdown. The remedy is procedural rather than clever: ask the contractor to price the qualifying elements separately from the start, and keep the specification. On a substantial scheme it is worth a capital allowances specialist reviewing the contract before it is let.
It also affects the seven-year payback test indirectly. The statutory test uses the installed cost, but your own investment appraisal should use the after-tax cost, and those can differ substantially.
Find the certificate you already have
Search the Energy Performance of Buildings Register for your building. It is free, there is no sign-up, and it takes about ten seconds.
Common questions
Can I claim capital allowances on EPC upgrade works?
Generally yes, where the expenditure is on qualifying plant and machinery. Lighting, heating, ventilation, air cooling and electrical systems are typically integral features; insulation added to an existing building has its own treatment. Take advice from your accountant on your own facts.
What is full expensing?
A 100% first-year allowance for companies on qualifying main-rate plant and machinery, with a 50% first-year allowance for special-rate expenditure including integral features.
Does the Annual Investment Allowance still exist?
Yes – £1 million a year, and it is available to unincorporated businesses as well as companies, which full expensing is not.
Sources
- Capital allowances manual and full expensing guidance – GOV.UK
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