What sort of capital allowances can be deducted when working out the IR35 deemed payment?
A deduction will only be given for capital allowances in working out the IR35 deemed payment where the plant or machinery is necessarily provided for use in the performance of the duties of the relevant engagement. This is a strict test and means that relief will only be given where the duties of the engagement meant that the company had to provide the equipment in question. If the company purchases the equipment out of choice then no deduction will be given. For example, where an IT contractor is required to use the client's computer equipment then no relief will be due for expenditure on computers owned by the Personal Service Company. Neither will any relief be due where the client makes all the equipment necessary to do a job available but the worker uses his or her own computers, out of choice.
Where cars are concerned the test is less rigorous since there is no "necessarily" test. As an alternative to claiming capital allowances relief will be given using HMRC's Authorised Mileage Rates.
Where during the tax year there is mixed qualifying and non-qualifying
use then any capital allowance claim should be apportioned on a just and
reasonable basis. Apportionment is normally by reference to the actual use
in the year. Non-qualifying use would be where the asset in question is
used for private use, on contracts not covered by the IR35 rules and on
IR35 contracts where the employment income rules are not satisfied.
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