Whether you run a construction firm, a manufacturing business, or a specialist service company here in Crawley or elsewhere in West Sussex, there will come a time when you need to invest in machinery or specialist equipment to keep growing.

But how you purchase, finance, and account for this equipment can have a huge impact on your cash flow and your tax bill.

In this guide, we’ll walk you through:

• What counts as machinery or specialist equipment
• How tax relief works (including capital allowances)
• VAT considerations
• Ownership options: buying outright vs financing
• Tips for making the most of your investment

What Counts as Machinery or Specialist Equipment?

If you’re buying assets that are essential to running your business and that will last for more than a year. You’re likely purchasing machinery or specialist equipment.

Here are some examples:

Industry: Construction

Examples of Specialist Equipment: Diggers, cranes, power tools, scaffolding

Industry: Manufacturing

Examples of Specialist Equipment: CNC machines, lathes, welding kits

Industry: Medical

Examples of Specialist Equipment: Diagnostic machines, dental chairs, therapy devices

Industry: Creative industries

Examples of Specialist Equipment: Film cameras, editing suites, 3D printers

Industry: Food industry

Examples of Specialist Equipment: Commercial ovens, refrigeration units, brewing equipment

Industry: Technology

Examples of Specialist Equipment: Servers, network infrastructure, robotics

Key test: If it’s vital to delivering your services or making your products and isn't just regular office gear. It's probably specialist equipment.

Everyday Expenses vs Capital Expenditure: A Quick Recap

Specialist machinery usually falls under capital expenditure rather than everyday running costs.

• Revenue Expenses: Things like stationery, fuel, and small tools are deducted in full as part of your trading expenses.
• Capital Expenditure: Larger purchases like machinery are treated differently — you claim capital allowances to spread the tax relief.
  

Don’t worry, thanks to government schemes like the Annual Investment Allowance (AIA), you can still often deduct the full cost straight away. 

How Capital Allowances Work for Machinery and Equipment

Capital allowances allow you to deduct the cost of business assets from your taxable profits.

Most machinery and equipment purchases qualify for:

• Annual Investment Allowance (AIA)
• Full Expensing (for some companies, from April 2023 onwards)
• First-Year Allowances (for energy-efficient equipment)
  

1. Annual Investment Allowance (AIA)

• Lets you deduct 100% of qualifying costs (up to £1 million per year) from profits immediately.
• Covers most plant and machinery.
• Great for businesses that want to boost their cash flow.
  

2. Full Expensing (New from 2023)

• Applies mainly to companies, not sole traders.
• Allows 100% deduction for qualifying new (not second-hand) plant and machinery.
• Useful if you’re making big investments in cutting-edge kit.
  

3. First-Year Allowances (FYA)

• Some "green" or energy-efficient equipment qualifies for enhanced deductions.
• Worth checking if you're buying solar panels, electric vehicle charging points, or similar.

VAT on Machinery and Equipment

If your business is VAT registered, you can usually reclaim the VAT on machinery and equipment purchases.

Example:

• New industrial oven: £5,000 + £1,000 VAT = £6,000 total
• You reclaim the £1,000 VAT on your next VAT return.
  

Important:

• Keep proper VAT invoices.
• Equipment must be used for business purposes.
• Partial use (business and personal) can affect how much VAT you reclaim.
  

If you use machinery partly for personal purposes (which is rare but possible), speak to your accountant to get the split right.

Buying New vs Second-Hand Equipment

Sometimes buying second-hand machinery is a smart move, especially for expensive or specialist kit.

New Equipment

• Comes with warranties and support
• Often qualifies for Full Expensing or AIA
• Typically more energy-efficient (could qualify for green allowances)

Second-Hand Equipment

• Lower upfront cost
• Still usually qualifies for AIA (but not Full Expensing)
• May require more maintenance

There’s no tax penalty for buying second-hand (except for missing out on Full Expensing), but always check:

• Equipment condition
• Remaining useful life
• Any hidden VAT issues if buying from an unregistered seller

Financing Options: Cash Flow Matters

Specialist machinery is expensive, often costing tens of thousands of pounds (or more). You need to balance getting the right kit with protecting your cash flow.

Buying Outright

• Best if you have healthy reserves.
• Immediate tax relief through AIA or Full Expensing.
• You own the asset fully from day one.
  

Hire Purchase (HP)

• Like a loan — you pay over time.
• Ownership passes to you at the end (after all payments).
• Capital allowances are usually available straight away, even before full payment.
  

Leasing

• You rent the equipment for a period.
• May be cheaper monthly but you don't own the asset.
• Payments are deductible as revenue expenses, not capital.
  

Each route affects your tax claims and cash flow differently.

Curve Accountancy can help you work out the smartest path based on your goals.

What About Maintenance, Repairs, and Upgrades?

Once you buy machinery or equipment, you’ll also have ongoing costs like:

• Servicing
• Repairs
• Replacement parts
• Upgrades and software updates
  

Good news:

• These ongoing costs are usually treated as revenue expenses fully deductible against profits when they happen.
• No complicated capital allowance claims needed.
  

Example:

Servicing a company crane costs £2,000 – you deduct the £2,000 from your taxable profits that year.

Dual-Use Machinery: Be Careful

If machinery or equipment has both business and personal use, things get trickier.

Example:

• You run a landscaping business.
• You buy a ride-on mower through your company.
• You also use it to mow your home lawn.
  

In this case:

• Only the business portion of the cost is deductible.
• You might face a benefit in kind tax charge if the company asset is used personally.
  

Always separate business and personal use where possible. And keep good records!

Local Grants and Support in Crawley and West Sussex

There are sometimes local business grants available to help with purchasing machinery or equipment.

Check:

• Crawley Borough Council business support schemes
• West Sussex County Council initiatives
• Local Growth Funds
• Innovation grants for tech and manufacturing industries
  

Many grants require:

• A clear business case
• Co-funding (you pay part, grant pays part)
• Proof of job creation or productivity gains
  

Curve Accountancy can help you find and apply for grants when available.

Real-World Example: Crawley-Based Engineering Firm

James runs an engineering services business based near Manor Royal Business District in Crawley.

He decided to invest in:

• A new CNC milling machine: £55,000 + VAT
• Specialist measurement tools: £8,000 + VAT
• New air compressor: £4,000 + VAT
  

Total spend: £67,000 + VAT

Here’s how he saved:

• Reclaimed £13,400 VAT on purchase
• Claimed full £67,000 Annual Investment Allowance
• Reduced Corporation Tax bill significantly
• Spread costs smartly with a hire purchase agreement
  

Result:

James upgraded production, improved delivery times, and saved thousands in tax.

Key Questions to Ask Before Buying Machinery

Before making a big investment, ask your accountant:

1. Can I claim full tax relief straight away?
2. Would buying or leasing be better for my cash flow?
3. Can I reclaim the VAT in full?
4. How will this affect my profit and loss?
5. Are there any grants or incentives available?
   

At Curve Accountancy, we help businesses across Crawley and West Sussex make confident, tax-smart decisions about capital investments.

Final Thoughts

Buying machinery or specialist equipment is a major milestone for many businesses and if you plan it carefully, it can be a major tax-saving opportunity too.

Understanding capital allowances, VAT, financing options, and grant opportunities can make all the difference between a smart investment and a financial headache.