Capital Allowances Act 2001 section 205

Reduction of annual investment allowance and first-year allowances

Section 205 deals with the reduction of annual investment allowances and first-year allowances where plant or machinery is used partly for a qualifying activity and partly for other purposes.

• Where plant or machinery expenditure is incurred partly for a qualifying activity and partly for other purposes, any annual investment allowance or first-year allowance must be reduced to a just and reasonable amount
• The reduction must take into account all relevant circumstances, including in particular the expected extent of non-qualifying use of the asset
• The assessment is forward-looking, considering how likely the plant or machinery is to be used for purposes other than the qualifying activity
• The reduction in the first-year allowance does not increase the amount of expenditure carried forward to the capital allowances pool for writing-down allowance purposes