Allowances made against tax for the cost of certain fixed assets such as machinery, plant or IT equipment. Capital allowances can be deducted from profits at a rate of 25% per year and so written it off over a period of time. Small and medium sized business can claim 40% in the first year on most plant and machinery and 100% on IT Equipment for the year 2003-2004. Charges may be imposed to take back capital allowances if you sell capital assets for more than the tax written down value.