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Capital Allowances for ‘Integral Features’

Capital allowances provide tax relief for capital expenditure in respect of which a revenue deduction is not available. In this way, relief is given for expenditure on fixtures and fittings, equipment, motor vehicles and suchlike. Since April 2008, plant and machinery capital allowances have also been available for integral features. However, special rules apply...

The legislation governing the availability of capital allowances for integral features is found in the Capital Allowances Act 2001 (ss 33A, 33B).

What Are ‘Integral Features’?

For capital allowance purposes, the following are integral features:

  • An electrical system, including a lighting system;
  • A cold water system;
  • A space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system;
  • A lift or escalator or moving walkway; or
  • External solar heating.

It should be noted that the capital allowances regime for integral features applies only to items on the above list.

An item which is not on the list, even if it forms part of the fabric of the building, is outside the scope of the integral features rules.

The definition of integral features expressly excludes any asset whose principal purpose is to insulate or enclose the interior of a building to provide an interior wall, floor or ceiling which is intended to remain in place indefinitely.

However, HMRC treat the installation of a plenum floor or plenum ceiling, the principal purpose of which is to function as an integral part of the heating or air conditioning system, as an integral feature and allow relief accordingly.

Replacement Expenditure

The capital allowance rules for integral features apply to expenditure on the replacement of such a feature as well as to the provision of it. For these purposes, expenditure is treated as replacement expenditure if it represents the whole or more than 50% of the cost of replacing the integral feature, either all at once or within a 12 month period.

Expenditure that falls into this category is treated as capital expenditure, rather than revenue expenditure, and is relieved by virtue of the capital allowances available for integral features.

The purpose of bringing replacement expenditure within the capital allowance rules is to prevent businesses from claiming a revenue deduction on the basis that the replacement of the integral feature is a repair to the larger structure that is the building.

However, if the ‘Annual Investment Allowance’ (AIA – see below) is claimed for the replacement as described below, it is still possible to obtain a 100% deduction against profits.

Scope of the Relief

Relief is available where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature of a building or structure used by the person for the purposes of the qualifying activity.

For capital allowances purposes, the list of qualifying activities includes ordinary property businesses, furnished holiday lettings businesses and overseas property businesses.

Expenditure on integral features is treated for capital allowances purpose as expenditure on plant and machinery. In line with other forms of plant and machinery, relief is given by means of either the AIA or writing down allowance. The relief options are discussed further below.

Annual Investment Allowance (AIA)

The AIA is effectively a 100% first year allowance that is available for most expenditure on plant and machinery, with the exception of cars. The AIA allowance is limited to expenditure of £100,000 per tax year (2010/11 and 2011/12).

This means that businesses can receive an immediate write off against profits for expenditure on plant and machinery during the tax year, including any expenditure on integral features, of up to £100,000.

Once this limit is reached, relief is given by means of the annual writing down allowance. The AIA limit is to be reduced to £25,000 from April 2012. Consequently, businesses thinking of incurring large items of capital expenditure in the next year or so may wish to accelerate projects to before April 2012 in order to take advantage of the £100,000 AIA limit while it remains available.


In 2010/11 James incurs a central heating system in a property that he lets out. The system costs £6,000. James claims the annual investment allowance. Relief is given in full for the expenditure on the central heating system and the cost of £6,000 is deducted in computing the profits of the property rental business for that year.

The AIA must be claimed, it is not given automatically.

Items of the type that fall within the definition of integral features are not cheap and the ability to obtain a 100% deduction against profits is likely to be attractive in most cases.

As the nature of integral features is such that they generally have a reasonably long life, the AIA option is likely to prove more attractive than claiming writing down allowance.

Once the AIA allowance limit is reached, the 100% write-off is not available for subsequent expenditure in the tax year. In this situation, the taxpayer could delay the expenditure until the following year in order to preserve the 100% deduction.

Where this tactic is employed, it should be remembered that the AIA limit is being reduced to £25,000 from April 2012. Alternatively, the writing down allowance could be claimed instead.

However, if writing down allowances are claimed, it is not possible to claim an AIA in respect of the expenditure at a later date.

As is explained below, expenditure on integral features is allocated to the ‘special rate pool’ and as such writing down allowances at given at a reduced rate.

Consequently, if the taxpayer incurs plant and machinery capital expenditure in a tax year in excess of the AIA, allowances will be maximised by claiming the AIA in respect of special rate pool items first. This will mean that where writing down allowances are given because the AIA limit has been exceeded, they are given at the highest possible rate.

Writing Down Allowance

Where the AIA is not claimed or is not available because the limit has already been reached, tax relief for expenditure on integral features is given by means of writing down allowance instead.

Expenditure on integral features is allocated to the special rate pool. Items that are within the special rate pool are entitled to a reduced writing down allowance of 10% on a reducing balance basis, rather than the standard writing down allowance of 20%.


Diana spends £10,000 on an electrical lighting system and £4,000 on air conditioning on a property which forms part of her property rental business. The AIA limit has been exceeded and writing down allowances are claimed. The expenditure is allocated to the special rate pool. There is no balance brought forward on the pool.

Additions in year:£Allowances £

Electrical lighting system


Air conditioning



WDA @ 10%



Balance c/f


Diana is therefore entitled to a WDA for the year of £1,400.

Practical Tip

The rules on integral features enable landlords to obtain a potentially immediate write-off for the cost of installing or replacing heating and water systems. As these are generally expensive, the relief is welcome, particularly if the landlord is hit with replacement costs without warning.

Landlords should ensure that they are familiar with the capital allowance rules governing different types of expenditure to ensure that they maximise the relief available. With the AIA limits falling significantly from April 2012, timing issues may also be important.

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