39 degrees, new air conditioning, and the gap between 100% and 6%

This week the Met Office issued a red extreme heat warning, the most serious one it has, and parts of the country went past 39 degrees. The June record, set back in 1976, did not survive it. Offices that have never owned a cooling system spent the week ordering one, and plenty that had a tired old unit decided this was the summer to replace it.

Somewhere in July those invoices will land on a desk near you, and the natural instinct will be to run the cost through as an expense and move on. For a fair amount of that spend the instinct is wrong, and the difference between getting it right and getting it nearly right can be the difference between full relief this year and a deduction that dribbles out over the next twenty.

Repair or improvement, before anything else

The first fork has nothing to do with capital allowances. It is whether the work is a repair or an improvement. If a client had a working air conditioning system and a part of it failed and was replaced, that is usually a repair, and a repair is revenue spending, deductible in full against this year's profit. If a client had no cooling and now has a whole system, or tore out an old one and put in something materially better, that is capital, and capital is a different regime entirely.

The line between the two is older than air conditioning. In O'Grady v Bullcroft Main Collieries Ltd [1932], a company replaced a factory chimney that had become unsafe and argued the cost was a repair. The court disagreed, because what had been replaced was an entirety in its own right rather than a subsidiary part of something larger, so the new chimney was a new capital asset. That "entirety" test still runs today. Replacing the compressor inside an existing system leans towards repair. Replacing the system leans towards capital. The same heat, the same contractor, the same week, and two completely different tax outcomes depending on what was actually done.

Then which pool, and why it costs money

Say it is capital. Air conditioning does not sit with the ordinary plant in the main pool. Since the integral features rules came in under the Finance Act 2008, powered systems of ventilation, air cooling and air purification are "integral features", and integral features go into the special rate pool. Left there, they attract a writing down allowance of just 6% a year on a reducing balance, which means a £30,000 system is still being relieved a decade later, long after the equipment itself has stopped earning its keep.

This is actually where the 2008 reform helped, because before it a building's air conditioning frequently got no allowances at all. The reason was a test the courts had spent decades refining: was the thing apparatus the business used, or was it simply the premises the business sat in? In Wimpy International Ltd v Warland [1989], the Court of Appeal went through a restaurant fit-out item by item and drew exactly that line, allowing the things that did a job and refusing the things that were only part of the setting. Fixed building services like air conditioning often fell on the wrong side of it. The integral features rules ended the argument by giving air cooling its own category, inside the net but at the slow rate. The job, then, is to get the spend out of the slow lane.

For most businesses the Annual Investment Allowance does exactly that. The AIA gives 100% relief in the year of purchase, up to £1m a year, and it applies to special rate spending including integral features. So a company or a sole trader spending well within that limit can have the whole air conditioning cost relieved in the first year, not 6% of it. The trap is assuming the headline relief everyone talks about does the same job. Full expensing, the permanent 100% first-year allowance for companies, only gives 100% on main-pool plant. On special rate spending, and that includes air conditioning, it gives 50% in year one and leaves the rest to drip through the special rate pool afterwards. For a company buying cooling, claiming the AIA rather than full expensing is very often the better answer, and it is precisely the detail that gets lost when an invoice is treated as just another cost of a hot week.

It is also worth being careful about what rides along with the installation. The Supreme Court came back to capital allowances only this April, in Orsted West of Duddon Sands (UK) Ltd v HMRC [2026] UKSC 12, and read the rules tightly. To qualify, spending has to be "on the provision of" the plant, which the court said means a close connection between the money and the equipment itself, not merely costs that relate to the wider project. That case was about offshore windfarm surveys rather than office cooling, but the principle travels. The units and the work to install them qualify. Looser associated costs may not, and that boundary is being policed more firmly now than it was a year ago.

What ends up on the file

None of this works on instinct, and all of it works on the file. The thing that turns a 6% deduction into a 100% one is evidence kept at the time. What did the contractor actually do, repair an existing system or install a new one? What did the quote and the invoice describe, and do they break the work down or lump it into a single line? Where a portable, plug-in cooling unit was bought rather than a fixed system wired into the building, that is loose plant in the main pool, not an integral feature, and it is worth recording as such rather than sweeping it in with the building work. The client who keeps the itemised invoice, the specification and a note of what was replaced has the claim. The client with one line reading "air con, £30,000" has handed the decision to whoever picks the cautious option later.

The heat will break, probably by the time you read this, and the cooling will sit idle until next summer. The invoices will not. They come through over the next few weeks, quietly, in among everything else, and the easy thing is to treat them as one more cost of a difficult spell of weather. The more valuable thing is to ask, on each one, what was actually done and which box it really belongs in. The weather was the emergency. The tax treatment is the part that is still there in October.

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