What is EIM 36870?

HMRC’s rules state that capital allowances should be claimed within your self assessment tax return (Section 3i and ii, CAA 2001).

EIM 38670 concerns capital allowances made without a tax return. It is especially important for trades people like mechanics who buy tools for work and want to make a backdated claim from previous tax years.

Who does EIM 36870 apply to?

The EIM 36870 applies to anyone who buys tools and equipment for work purposes and is eligible to claim capital allowances.

If you are one of the many taxpayers that don’t complete a tax return and your claim is for less than £2500 (in any one tax year), your capital allowance claim can be made by putting your claim in writing to HMRC. The other option is to submit your first self assessment tax return and join the SA system in full.

When is the deadline for capital allowance claims under EIM 36870?

The timelines for going down this regulatory avenue are exactly the same as if you were submitting a self assessment tax return.

In the self assessment system, you have up to three years after the 31st October following the tax year you are claiming for. So if you are within this time frame for self assessment, you are also within the deadline for a capital claim made in writing.

What happens if I am unhappy with the outcome of my capital allowance claim?

If you are not happy with the outcome of your capital allowance claim, then you will have to make an appeal.

Capital allowance claims are not settled ‘by agreement’ (under Section 42 TMA 1970).

You can make an appeal against a Schedule E assessment for tax years 1995/96 and before.

From 1996/97, you make an appeal ‘against an HMRC amendment to a self assessment’. This will mean that, even if you originally used form P87 or claimed in writing, you will need to submit a self assessment tax return for the year you are appealing.