In general capital expenditure cannot be deducted in arriving at taxable profits. This means that any depreciation charged in the commercial accounts must be added back when taxable profits are computed.
Capital allowances give a taxpayer relief for certain types of capital expenditure.
Not all types of capital expenditure qualify for capital allowances. For example, expenditure on commercial buildings does not normally qualify for capital allowances. Some allowances only cover expenditure incurred in a specified period. Capital expenditure incurred on constructing dwelling houses let under the assured tenancies scheme only qualifies for allowances if it was incurred before 15 March 1988 with a saving for certain expenditure incurred before 1 April 1992.