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HMRC internal manual

Employment Income Manual

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Deductions from earnings: capital allowances: particular items of machinery or plant: computers and word processors

Section 36(1) CAA 2001Most employees will not be able to satisfy the statutory test for capital allowances in Section 36(1) CAA 2001 (see

EIM36520) in relation to the purchase of computers, word processors and their peripherals. Even if they can show that such equipment is essential for their duties, it is very often the case that the employer will supply what is needed (see EIM36560). It is not enough for the taxpayer to claim that what the employer provides or will provide is inadequate.

The situation will be different if the duties themselves are not clearly defined and the employer requires the employee to provide the equipment needed out of his or her own pocket. A deduction should not be refused simply because previous holders of the post concerned, or existing holders of similar posts, find it possible to manage without the use of the most up-to-date equipment. A salesman who makes twice as many calls on clients as some of his colleagues will not have his allowable travel expenses restricted under Section 337 ITEPA 2003 on the grounds that the additional calls were not necessary. Similarly a saleswoman who purchases a computer to produce estimates at a rate faster than her colleagues should not be denied capital allowances on the grounds that she could have done her job without the equipment, provided that the tasks the computer performs are themselves an essential part of the duties.

Broadly speaking, you can accept that the equipment is ‘necessarily provided’, and admit a claim to capital allowances where:

  • an employee has a job which is paid entirely or largely by results and
  • although the object, such as selling life insurance, is clear, the method by which the employee is to achieve results is not stereotyped and
  • the employee is required to bear the cost of any equipment performing functions or activities intended to achieve that objective (that is, the employer will not provide or pay for such equipment).That does not of course mean that a computer can never qualify for capital allowances in any other circumstances. The guidance on this page sets out the usual position as regards computers. But in any case where agreement cannot be reached it is important that you obtain all the relevant facts and apply the general guidance in

EIM36520onwards before you make arrangements to refer the matter to the First-tier Tribunal.

If capital allowances are due they will be subject to a restriction if the equipment is also used for private purposes (see EIM36570).

For references to particular types of employment see Table 4 in EIM36500.

As regards first year allowances for equipment purchased between 1 April 2000 and 31 March 2004, see EIM36731.