Archive for the 'Capital Allowances' Category

Annual Investment Allowances rise…. temporarily

Published on April 5, 2013 in Capital Allowances. 0 Comments Tags: , , , , , .

In the Autumn statement, the Chancellor announced a tenfold increase in the amount of Annual Investment Allowance (AIA) available. The AIA gives full tax relief for expenditure on integral features and plant and machinery as it is incurred. It is not available on cars.

This will be the third change in the rate of this allowance in less than twelve months. Up to 31 March 2012 (for corporates) and 5 April 2012 (for other taxpayers) the allowance stood at £100,000. Since then, and until 31 December 2012, the allowance is £25,000.

For expenditure incurred on or after 1 January 2013 the maximum annual AIA becomes £250,000. This is for a two year period and so the annual AIA will reduce to £25,000 for expenditure incurred after 1 January 2015.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. The calculations are complex depending on the accounting year end and the date of the spend, with specific difficulties if the accounting period covers spending prior to the rate reduced in April 2012.

Please contact us before capital expenditure is incurred for your business in a current accounting period, so that we can help you to maximise the AIA available, you could potentially save £000’s of tax.

This article was compiled by Karen Ashton, Client Manager at Balance Accountants.

Significant Changes to Capital Allowances

Published on January 24, 2012 in Capital Allowances and Straight from the Boss. 0 Comments Tags: , , , , , .

The capital allowances regime will change significantly on 1 April 2012 for limited companies and on 6 April 2012 for soletraders and partnerships.

Currently, there is an annual investment allowance of £100,000 per annum which means that expenditure on plant & machinery, including vans, is fully tax deductible in the year of acquisition up to £100,000 of total expenditure.  From 1/6 April 2012 this annual allowance will fall to £25,000 per annum.  Any amounts in excess of the £25,000 will only qualify for annual writing down allowances of 18% of cost (20% prior to 1/6 April 2012).

For any business with a 31 March year end therefore, there will be a significant benefit in incurring any major plant and machinery investment before the year end when the higher rate of annual investment allowance will apply.

However the position becomes more complicated where the business year end spans 1/6 April 2012.  In this case, any expenditure incurred prior to 1/6 April will get a proportionate amount of the £100,000 annual investment allowance, whilst any expenditure after 1/6 April 2012 will get a proportionate amount of the £25,000 annual investment allowance but none of the £100,000 annual investment allowance.

For example, a business with a year end of 31 May:

If expenditure on plant and machinery is incurred before 1/6 April 2012 then it will attract a maximum of 10/12 of the £100,000 (i.e. 10 months out of 12) which amounts to a maximum of £83,000.

If expenditure is incurred in April or May, however, then it will not attract any of the £100,000 allowance and will only be eligible for a maximum of 2/12 of the £25,000 allowance which is a measly £4,166.

Confused?????? – we certainly were – so if you are thinking of acquiring plant and machinery in the next six months or so, and want some advice on the best timimg, please do not hesitate to give us a call.

This article was compiled by Ashley Barrowclough on behalf of the Balance Team

Find out the best time to buy if planning on significant additions/replacements to you plant and equipment

Maximise Your Capital Allowances Claims

Published on March 30, 2011 in Capital Allowances, Quick Tax Tips and Tax Planning. 0 Comments Tags: , , , , , .

With the tax year end coming up fast you should consider the timing of purchases so as to maximise the capital allowances available.  Bringing forward capital expenditure into the current tax year you can increase the amount of relief available and reduce your income tax significantly. With the changes to the annual investment allowance such that for 2010/2011 and 2011/2012 the amount available is £100,000 for each tax year, business owners should consider utilising these amounts before the Annual Investment Allowance reduces to £25,000 for 2012/2013.

In addition, claiming the annual investment allowance may also impact upon your Tax Credits Claim for the year.  Given that the Tax Credits regime is becoming less generous, you should consider maximising your claim now and see the cash flow and tax advantage utilised earlier.

With Government incentives for energy efficient plant and machinery, environmentally friendly vehicles and energy efficient plant, you could get 100% first year allowances on a whole host of items purchased through the business.

Extract taken from our 2011 Bonus edition Tax newsletter – if you would like to subscribe please leave your details here.