How are capital allowances given effect under section 2 of the Capital Allowances Act 2001?

Under section 2, capital allowances and balancing charges are given effect by including them in the calculation of taxable income for income tax purposes or taxable profits for corporation tax purposes for the relevant chargeable period. This is the general mechanism that applies across all categories of qualifying capital expenditure.

What types of capital allowances does section 2 of the Capital Allowances Act 2001 apply to?

Section 2 applies generally but directs readers to specific provisions for each type of allowance, including plant and machinery, structures and buildings, business premises renovation, mineral extraction, research and development, know-how, patents, dredging, and assured tenancy allowances. Each category has its own detailed rules for how allowances feed into the tax computation.

What does 'chargeable period' mean in the context of section 2 of the Capital Allowances Act 2001?

The term 'chargeable period' is defined in section 6 of the Capital Allowances Act 2001. It broadly means a tax year for individuals and partnerships subject to income tax, or an accounting period for companies subject to corporation tax. Allowances and charges are computed and given effect for each chargeable period.

How does section 2 define 'profits' for corporation tax purposes?

For corporation tax purposes, section 2 provides that the word 'profits' carries the same meaning as in Part 2 of the Corporation Tax Act 2009. This ensures consistency between the capital allowances legislation and the main corporation tax charging provisions, so that allowances and balancing charges integrate correctly into the corporate tax computation.

Capital Allowances Act 2001 section 2

General means of giving effect to capital allowances

Section 2 sets out the general mechanism by which capital allowances and balancing charges are given effect for both income tax and corporation tax purposes.

Capital allowances and charges are given effect by including them in the calculation of income (for income tax) or profits (for corporation tax) for a chargeable period
The general rule must be read alongside specific provisions for each type of allowance, including plant and machinery, structures and buildings, mineral extraction, research and development, know-how, patent, dredging, business premises renovation, and assured tenancy allowances
The term "chargeable period" is defined separately in section 6 of the Act, and broadly means a tax year for income tax or an accounting period for corporation tax
The term "profits" for corporation tax purposes carries the same meaning as in Part 2 of the Corporation Tax Act 2009

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