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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): buildings and structures: thermal insulation of industrial buildings

CAA01/S27 - S28 & CAA01/S63 (5)/S104A. FA08/ S71

Treat expenditure incurred on adding insulation against loss of heat to a building (other than a dwelling-house used in a residential property business) occupied by a person for the purposes of a qualifying activity, as capital expenditure incurred on plant or machinery. This treatment also applies to a landlord who adds thermal insulation to a building (other than a dwelling-house) let by him in the course of his business.

PMAs are available for this expenditure if no relief (either an allowance or deduction) is otherwise available.

Treat the person who incurs the expenditure as owning the plant or machinery as a result of incurring the expenditure. This means that the expenditure can qualify for PMAs.

Before FA08, it was only expenditure incurred on the thermal insulation of industrial buildings that qualified for PMAs under CAA01/S.28. With effect from 1 April 2008 (for CT purposes) and 6 April 2008 (for IT purposes) expenditure incurred on adding thermal insulation to all buildings (apart from dwelling-houses, see below) occupied for the purpose of a qualifying activity is now eligible for PMAs.

At the same time as extending the scope of the relief, FA08 classified this expenditure as ‘special rate’ expenditure (CAA01/S.104A). So this expenditure is now entitled to PMA WDAs at the special rate (rather than WDAs at the main rate).

The rate of WDA for the main and special rate pools is reduced from 20% to 18% (main rate) and from 10% to 8% (special rate) for expenditure incurred on or after 1 April 2012 (CT) and 6 April 2012 (IT).

Relief is only available for expenditure on thermal insulation added to an existing building. It is not available on expenditure on thermal insulation incurred as part of the original construction cost.


Nalini owns and runs the Koh-i-noor Hotel. The heating bills are very high because it is an old building and loses a lot of heat. In September 2008 Nalini adds thermal insulation to the hotel hoping to reduce the heating bills. Nalini can claim PMAs on that expenditure in the special rate pool.

Exception applying to the thermal insulation of a dwelling-house

As indicated above, expenditure incurred by a person carrying on any qualifying activity (including a property business) in adding insulation against loss of heat to a building used for the purposes of that activity generally qualifies for PMAs. But this entitlement is subject to the specific exclusion (CAA01/S35) in the case of P&M for use in a dwelling-house, which does not qualify for PMAs.

However, a landlord of a dwelling-house may claim a quite separate tax relief, sometimes called ‘Landlord’s Energy Saving Allowance’ (or LESA), under either section 251 CTA 2009 (formerly section 31ZA of ICTA) or section 312 of ITTOIA (as the case may be), which at 100% (subject to a cap), is generally more favourable than a 10% WDA. So subsections (2B) and (2C) of s.28 effectively preserve the landlord’s entitlement to the more favourable 100% deduction by excluding such expenditure from PMAs where LESA applies.


If there is a disposal event (CA23240) the disposal value is nil.

Expenditure covered

Give the expression ‘insulation against loss of heat’ its ordinary meaning. Treat capital expenditure on things like roof lining, double-glazing, draught exclusion and cavity wall filling as expenditure on thermal insulation. Sometimes expenditure may be incurred for more than one reason. For example, double-glazing may be installed to insulate against both noise and loss of heat. The expenditure will qualify under Section 28 provided that it is clear that insulation against loss of heat is one of the main reasons why it was incurred.