Capital Allowances for Pharmacies: Are You Claiming Everything You’re Entitled To?
As a pharmacy owner, managing your business’s finances involves a range of tax considerations, one of which is capital allowances. Capital allowances allow you to claim tax relief on the cost of certain capital assets used in your business, such as equipment, furniture, and even the cost of renovating or improving your pharmacy premises.
Unfortunately, many pharmacy owners miss out on valuable tax savings by not claiming all the capital allowances they are entitled to. In this post, we’ll explain what capital allowances are, which assets qualify, and how you can ensure you're making the most of them.
At Pharmatax, we help pharmacy owners like you maximize your tax relief and ensure you're claiming all the capital allowances available. Read on to find out how to unlock these potential savings for your pharmacy.
1. What Are Capital Allowances?
Capital allowances are a form of tax relief that allows businesses to deduct the cost of certain capital assets from their profits. These are assets that have a long-term value and are used in the day-to-day running of your business, such as:
Equipment (e.g., dispensary machinery, fridges, or computers)
Office furniture (e.g., desks, chairs, and filing cabinets)
Fixtures and fittings (e.g., shelving, lighting, and flooring)
Property improvements (e.g., costs associated with renovating or altering the pharmacy premises)
Capital allowances are essentially a way for you to reclaim a portion of the cost of these assets over time. Instead of treating the full cost as an immediate business expense, you spread the deductions over several years, typically depending on the asset’s expected useful life.
2. What Assets Qualify for Capital Allowances?
Not all assets qualify for capital allowances, so it’s important to know what you can claim. Some of the most common qualifying assets for pharmacies include:
Furniture and Fixtures: Desks, chairs, cabinets, display units, and shelving used within your pharmacy.
Medical Equipment: Dispensary machinery, fridges, and equipment used for the preparation or storage of medicines.
Computers and IT Systems: Any technology or software used for business operations, from pharmacy management systems to POS systems.
Property Improvements: If you’ve invested in improving your premises, such as installing new lighting, flooring, or security systems, these improvements could qualify for capital allowances.
Vehicles: If your pharmacy owns vehicles (such as delivery vans), you may also be able to claim capital allowances on the cost of these vehicles, depending on how they’re used.
Note: Personal assets, such as home furniture or equipment not used for business purposes, are not eligible for capital allowances. It’s important that the asset is used for business operations and contributes to the functioning of the pharmacy.
3. Types of Capital Allowances You Can Claim
When claiming capital allowances for your pharmacy, there are a few different types of allowances you might be eligible for. The most common include:
A. Annual Investment Allowance (AIA)
The AIA allows you to claim 100% tax relief on qualifying assets in the year you purchase them, up to a specified limit. As of the current tax rules, businesses can claim up to £1,000,000 per year (subject to change, so be sure to check the latest threshold).
What You Can Claim Under AIA:
Most types of equipment, machinery, and furniture used within your pharmacy can be claimed under AIA.
Vehicles used for business purposes can also qualify for AIA, but only if they meet certain criteria.
Why It’s Important:
AIA can provide a significant upfront tax deduction, allowing you to reduce your tax bill in the year of purchase. This is particularly beneficial for pharmacies investing in high-cost equipment or refurbishing their premises.
B. Writing Down Allowances (WDAs)
If you cannot claim the full cost of an asset in the year of purchase, you can use Writing Down Allowances (WDAs) to claim a percentage of the asset’s cost over time. The percentage varies depending on the asset and its category, but typically, assets are written down over several years.
What You Can Claim Under WDAs:
For most assets, including furniture, fixtures, and certain types of equipment, you’ll use WDAs to spread the tax relief across a number of years.
Why It’s Important:
WDAs allow you to continue claiming tax relief on qualifying assets beyond the first year, giving you an ongoing tax benefit.
C. First-Year Allowances (FYAs)
Certain types of environmentally-friendly or energy-efficient equipment may qualify for First-Year Allowances (FYAs). These allow you to claim 100% of the asset’s value in the first year of purchase, just like AIA.
What You Can Claim Under FYAs:
Environmentally friendly equipment, such as energy-efficient lighting or low-carbon heating systems, could qualify for a FYA.
Why It’s Important:
If you’re making eco-friendly upgrades to your pharmacy, FYAs could offer a way to get instant tax relief and reduce the overall cost of these improvements.
4. The Benefits of Claiming Capital Allowances
Claiming capital allowances can significantly reduce your pharmacy’s tax burden. The benefits include:
Immediate Cash Flow Relief: By claiming AIA on qualifying assets, you can reduce your taxable profits in the year you purchase the asset, leading to immediate tax savings.
Ongoing Tax Relief: With WDAs, you can continue to claim tax relief on assets over several years, helping to reduce your tax bill in the future.
Maximized Deductions: You may be able to claim capital allowances on a wide range of assets, including renovations and improvements, which can maximize your overall tax savings.
5. Are You Claiming All the Capital Allowances You’re Entitled To?
Many pharmacy owners fail to claim all the capital allowances they are entitled to, either because they aren’t aware of what qualifies or because they miss the opportunity to claim on certain types of assets. It's also common for businesses to overlook property improvements or qualify for AIA when they invest in high-value equipment.
To ensure you’re not leaving money on the table, it’s important to review your capital assets regularly and claim any allowances that you qualify for.
6. How Pharmatax Can Help You Maximize Your Capital Allowances
Navigating capital allowances can be complex, especially for pharmacies that invest in a wide range of assets. At Pharmatax, we specialize in helping pharmacy owners claim the maximum amount of tax relief available to them.
Our services include:
Identifying qualifying assets: We’ll help you identify which assets in your pharmacy are eligible for capital allowances.
Claiming AIA and WDAs: We’ll ensure that you maximize your capital allowances claims, including making use of AIA for high-value purchases.
Ongoing support: We can assist with ongoing claims for writing down allowances and ensure your claims are updated regularly.
With our expert guidance, you can ensure that your pharmacy is fully compliant with tax regulations while making the most of your capital allowances.
Contact Pharmatax Today
📞 Call us at 02476017778
📧 Email us at info@pharmatax.co.uk
🌐 Visit our website at www.pharmatax.co.uk
