Spent thousands on ASICs and GPU farms and unsure whether to capitalise or expense costs? If the rigs form part of a trade and are plant and machinery, capital allowances normally apply. Choose AIA/full expensing for immediate relief or WDA to spread relief over years.
Capital allowances for crypto equipment
The rule: if mining is a trade and the equipment is plant and machinery, capital allowances normally apply. This explains how capital allowances apply to crypto mining kit and when to use AIA or WDA.
How HMRC assesses mining kit
HMRC looks for a trade and for enduring use of the asset within that trade. Evidence of organisation, profit intent and continuous operation strengthens a claim.
HMRC expects invoices, photos, serial numbers and deployment dates. The Capital Allowances Manual and the Cryptoassets Manual explain the evidence HMRC accepts. Capital Allowances Manual
Assets used in a trade that are durable and necessary for the trade are likely plant and machinery. Keep clear records to show durability and necessity.
AIA and WDA decisions often hinge on proof of trade status. Prove trade status with bank accounts, contracts and regular sales.
A simple checklist helps to gather the common documents HMRC asks for. This makes answering queries much faster.
Statutory basis and guidance
The statutory tests sit in the Capital Allowances Act 2001 and related corporation tax law. HMRC guidance updated in recent years gives current examples and procedures.
The Annual Investment Allowance limit is £200,000 from 1 January 2021. Full expensing for qualifying main rate plant started on 1 April 2023 for companies under the Finance Act 2023.
Use the Capital Allowances Act 2001 and HMRC manuals as the legal foundation for any claim. Keep a copy of the relevant manual extracts.
VAT, leasing and second-hand rules change the allowance base and timing of relief. Check VAT status and leasing terms before buying.
If the buyer is VAT registered and reclaims input VAT, the allowance base is the net-of-VAT cost. For example, a £7,200 purchase with £1,200 VAT yields a £6,000 allowance base if VAT is reclaimed.
If the seller uses the margin scheme or is not VAT registered, input VAT is not reclaimable and the buyer’s allowance base is the gross price. Leasing changes who claims relief.
With an operating lease, the hirer deducts rentals as revenue expenses. The hirer does not claim capital allowances in that case.
With a finance or hire purchase, the hirer effectively becomes the owner and can claim capital allowances. The usual AIA and WDA rules then apply.
When buying second-hand rigs, check whether the seller gave warranties about previous tax treatment. Keep the VAT invoice or a margin scheme confirmation.
Tax relief for miners depends on getting the base cost right. Input VAT and margin scheme rules directly change the amount the business can claim.
Company miners: claim AIA or WDA
If the miner trades through a company, the company claims capital allowances on its tax return. The company chooses AIA or pools assets for WDA depending on the AIA cap.
When to use AIA
AIA gives 100% relief up to the annual cap for qualifying plant and machinery in the year the cost is incurred. Use AIA for one-off purchases under the cap to get immediate tax relief.
AIA is subject to the annual limit and excludes some items such as cars. If the company uses AIA, the tax saving equals cost times the corporation tax rate in the year claimed.
Short life assets and pool rules
If assets will be sold within eight years, consider a short life asset election to simplify balancing charge treatment. Without the election, assets enter the main pool or the special rate pool.
Main pool WDA is typically 18%. Special rate pool WDA is typically 6%.
The company records pool movements each accounting period. A disposal triggers a balancing adjustment if sale proceeds exceed the tax written down value.
Step-by-step practical claims checklist and accounting entries:
- On purchase, capitalise the miner in the company accounts: Dr Plant & Machinery (non-current asset) £X; Cr Bank/Cash £X.
- Keep a primary evidence pack: invoice with serial, supplier details and date of delivery, payment evidence, installation photos, and meter or uptime logs.
- Decide relief: if claiming AIA or full expensing, record a 100% capital allowance in the tax computation for the period.
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If using WDA, apply writing down rates in the tax computation and track the pool WDV at each accounting period end.
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Accounting for disposal: on sale Dr Bank £proceeds; Cr Plant & Machinery £cost (remove the asset from the books). Recognise any profit or loss in the profit and loss account.
- For tax, compute the balancing charge or allowance as sale proceeds less tax WDV of the pool. Include it in the tax computation.
- Returns and deadlines: include the capital allowances claim on the CT600 for companies and on SA103 for sole traders in the period of expenditure.
- Corporation tax payment is normally due nine months and one day after the accounting period end for many companies. The CT600 must be filed within 12 months of that period end.
- Retain records for at least six years after the relevant return. If you elect short life asset treatment, keep the election and disposal records.
These entries and timings turn high-level rules into the bookkeeping and tax return steps HMRC expects. Follow them to reduce the risk of adjustments.
Sole traders and small-scale miners
Sole traders claim capital allowances on their self-assessment only if the activity is a trade. Distinguish trading activity from hobby activity using standard trading tests.
Trading tests and evidence
Key indicators of a trade include a profit motive, scale, continuity and businesslike organisation. Keep business bank accounts, invoices and a simple trading log to show trading intent.
A typical borderline case: a spare-time miner using household electricity without separate meters often fails to show predominant business use. Such cases cannot safely claim capital allowances.
Electricity and running costs
Electricity and running costs are revenue expenses and are deductible separately from capital allowances. Record meter readings, uptime logs and allocation notes when electricity is shared with other activities.
A dedicated meter or a smart meter export log greatly strengthens the claim that kit is used predominantly for business purposes. This evidence makes enquiries easier.
Calculating tax relief with examples
Compare AIA or full expensing against WDA using worked numbers to see the cash tax effect over three to six years. Use a spreadsheet model to calculate immediate relief, WDA schedules and balancing charges on disposal.
New rig example
Assume a company buys a new rig for £10,000 with no reclaimable VAT and corporation tax at 25%. If AIA or full expensing applies, the immediate corporation tax saving is £2,500 in year 1.
If WDA at 18% is used, year 1 relief is £1,800. The tax saving in year 1 is smaller and the balance remains for future years. Over three years WDA yields a lower cumulative cash tax relief than immediate expensing.
Second-hand and VAT example
If a rig costs £6,000 second-hand and the seller used the VAT margin scheme, input VAT is not reclaimable and the buyer’s base cost is £6,000. If the seller charged VAT normally and the buyer is VAT registered, input VAT of £1,200 could be reclaimed and the capital allowances claim applies to the net cost of £4,800.
Reclaiming VAT reduces the allowance base and shifts the timing of tax benefit. Check the VAT paperwork before you claim.
Use a simple split: enter purchase price, VAT reclaimed, applicable pool rate and corporation tax rate into the calculator to see AIA vs WDA across 3–6 years. This rule of thumb makes the decision numeric, not a guess.
| Feature |
AIA / Full expensing |
WDA (main/special) |
| Immediate relief |
100% up to cap in year of purchase |
Spread over years at 18% or 6% |
| Best for |
One-off purchases under cap |
When AIA exhausted or inapplicable |
| Disposal effect |
Sale proceeds may trigger balancing charge |
Balancing charge based on pool WDV |
Step 1
Record purchase invoice, serials and install date.
Step 2
Decide AIA or pool and enter numbers in the spreadsheet.
Step 3
File claim on CT600 or SA103 and keep evidence for six years.
Example, full numeric run-through for a single rig (AIA v WDA and balancing charge):
- Assume a company buys a new ASIC miner for £10,000 on 1 January and is subject to corporation tax at 25%. Option A: the company claims AIA or full expensing and so gets 100% relief in year 1.
- Taxable profits fall by £10,000, giving a cash tax saving of £2,500 in year 1. If the rig is sold in year 3 for £3,000 the tax written down value after an AIA claim is nil.
- The whole £3,000 sale proceeds are a balancing charge and increase taxable profits in year 3. The corporation tax on that charge at 25% is £750.
- Net lifetime cash tax saving is £1,750 (£2,500 less £750). Option B: WDA at 18% main pool. Year 1 WDA = £1,800, giving WDV £8,200.
- Year 2 WDA = £1,476, giving WDV £6,724. Year 3 WDA = £1,210, giving WDV £5,514.
- If the rig is sold in year 3 for £3,000 the balancing charge equals proceeds less WDV. In this case proceeds are below WDV so no balancing charge arises.
- The company obtains smaller annual tax reliefs (£450, £369 and £302 cash tax savings at 25% in the first three years, respectively).
The example shows the timing trade-off clearly. AIA front-loading gives larger immediate relief but may generate a balancing charge on disposal. WDA smooths relief and can avoid balancing charges if proceeds stay below tax WDV.
Common errors and HMRC risks
The error most frequently seen is treating the whole cost as an immediate revenue expense instead of capitalising and claiming allowances. This misclassification can lead to corrections and tax assessments.
This works well in theory; poor records on electricity allocation and disposals, however, trigger enquiries in practice. The evidence HMRC asks for is usually basic: meter logs, purchase invoices and sale receipts.
A typical case: a miner took immediate relief incorrectly, later sold the rig and faced a balancing charge that wiped out earlier tax savings. The company then had to amend prior returns to reflect pooling rules.
Top mistakes
Mistake 1: assuming every rig automatically qualifies without showing trade status. Mistake 2: ignoring balancing charges on disposal. Mistake 3: failing to document electricity allocation.
Avoid these by keeping a simple evidence pack and by noting when a rig moves between business and private use. Good notes make enquiries easier.
How HMRC enquiries work
HMRC opens enquiries when records are inconsistent or missing. Respond promptly with clear invoices, meter logs and deployment photos to reduce the chance of adjustment.
If HMRC raises a point, present the pool workings and disposal records. Show the connection between the rig and trading activity.
Do not apply capital-allowance treatment when the activity is a genuine hobby, the equipment is for purely personal use, the asset is leased and the lessor claims allowances, or the cost relates to acquiring tokens rather than physical plant.
For complex purchases or uncertain trade status, instruct a tax adviser who is a member of ICAEW or CIOT to review the proposed claim and supporting evidence before filing. Professional review cuts the risk of costly mistakes.
Frequently asked questions
What records does HMRC expect to see?
Keep invoices showing supplier, serial numbers and dates, proof of payment, installation photos and deployment dates. Also keep electricity bills, meter readings and uptime logs if the rig shares power with other uses. These records support business use and the amount claimed.
Can a hobby miner claim capital allowances?
No. Capital allowances require a trading activity. Casual or hobby mining without profit intent and without commercial organisation does not meet the test. If uncertain, document profit motive and business steps before claiming.
How does a disposal create a balancing charge?
A balancing charge arises if sale proceeds exceed the tax written down value of the asset or pool. The charge adds to taxable profits in the period the disposal occurs and must be shown on the tax return.
Does VAT on the purchase affect capital allowances?
Yes. If the buyer reclaims input VAT, capital allowances apply to the net-of-VAT cost. If the seller used the margin scheme or is not VAT registered, input VAT may not be reclaimable and the base cost differs. Keep VAT invoices as evidence.
Is electricity treated as capital expenditure?
No. Electricity and other running costs are revenue expenses and are deductible in computing trading profits. Capital allowances apply to the physical plant, not to the ongoing power supply.
When should a short life asset election be used?
Use it if the asset is expected to be sold within eight years and the election better matches the timing of tax relief to the business plan. Make the election in the company tax return and keep clear records of the election date.
What to do next
First, decide whether the activity is a trade using the checklist above and gather invoices, serial numbers and meter logs. This prepares the evidence HMRC will expect and helps choose between AIA and WDA.
Second, run the numbers in the spreadsheet: enter purchase price, VAT treatment, expected sale price and the company or personal tax rate to see the cash tax impact over three to six years. The numeric view avoids guesswork when choosing AIA or WDA.
Third, document the claim on the appropriate tax return (CT600 for companies, SA103 for sole traders) and retain all supporting evidence for at least six years in case HMRC requests it. For complex arrangements, consult a tax adviser who specialises in crypto and is a member of an established professional body.
HMRC’s Cryptoassets Manual and the Capital Allowances Manual remain the reference points when preparing a claim.
