Whether you are furnishing a new office, refurbishing an existing workspace or replacing outdated furniture, understanding the tax treatment of your investment can help you plan your expenditure more effectively.
Capital allowances allow businesses to claim tax relief on certain capital assets used within the business. Office furniture and equipment may qualify as plant and machinery, meaning businesses could be able to claim tax relief on qualifying purchases.
However, the rules surrounding capital allowances have changed since the introduction of the 130% super-deduction in 2021. The super-deduction ended on 31 March 2023 and should no longer be presented as a current tax incentive.
What Are Capital Allowances?
Capital allowances are a form of tax relief that allows businesses to deduct some or all of the value of qualifying capital assets from their taxable profits.
For office-based businesses, this can potentially include certain items of office furniture and equipment that are purchased and used for business purposes. HMRC generally refers to these assets as ‘plant and machinery’.
The amount a business can claim depends on the type of asset, the business structure and which capital allowance applies.
Annual Investment Allowance for Office Furniture
One of the main capital allowances available to businesses is the Annual Investment Allowance (AIA).
The AIA allows businesses to deduct the full value of qualifying plant and machinery from their taxable profits, subject to the annual allowance limit. The current AIA limit is £1 million. This can make a significant difference for businesses investing in their workplace. For example, if qualifying office furniture is purchased for £20,000, the business may be able to claim the full £20,000 under the AIA, provided it meets the relevant requirements and has sufficient allowance available.
The tax saving itself will depend on the business's circumstances and applicable tax rate, so businesses should speak to their accountant or tax adviser before making a claim.
What About Full Expensing?
Full expensing is another capital allowance that can provide significant tax relief, but it is important to understand who can use it.
Full expensing allows companies subject to Corporation Tax to deduct 100% of the cost of qualifying new and unused main-rate plant and machinery from their taxable profits in the year the expenditure is incurred. There is no overall expenditure cap for full expensing.
However, not every item of office furniture will necessarily qualify for full expensing. The eligibility of individual purchases depends on the capital allowances rules, including the type and nature of the asset.
Businesses should therefore check the treatment of specific furniture purchases with their accountant or tax adviser before assuming that full expensing applies.
Why Consider Capital Allowances When Refurbishing Your Office?
Understanding the available capital allowances can be particularly useful when planning a significant office refurbishment or workplace upgrade.
Instead of viewing new office furniture purely as an expense, businesses can consider how qualifying investments may interact with the capital allowances available to them.
This could include investments such as:
- Office desks and workstations
- Office chairs
- Storage and filing solutions
- Workplace screens and partitions
- Other qualifying office equipment
The exact tax treatment will depend on the individual item and the circumstances of the business, so professional tax advice should always be obtained where necessary.
Creating a Better Workplace with Oaktree Interiors
At Oaktree Interiors, we understand that office furniture needs to do more than simply fill a room. The right furniture can help create a workspace that is practical, comfortable and aligned with your business's requirements.
We work with businesses to source office furniture from manufacturers, helping clients find solutions that suit their workspace, budget and overall design.
From ergonomic office chairs and desks to partitions, screens and other workplace furniture, we can help you create a professional office environment tailored to your business.
If you are planning an office refurbishment or looking to replace your existing workplace furniture, our team can help you find the right solution.
Please note: Capital allowance rules can vary depending on the type of business, asset and expenditure involved. The information in this blog is intended as general guidance and should not be considered financial or tax advice. Businesses should speak to a qualified accountant or tax adviser regarding their individual circumstances.