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Making the most of Capital Allowances
With the Annual Investment Allowance (AIA) having been cut to £25,000 for 2012-13 onwards, there are a number of issues and opportunities that you need to take into account – and the team at Moore Thompson can help.
If your business’s accounting period spanned the April changeover date, the AIA relief is time apportioned, with the maximum allowance for the transitional period falling into two parts:
- The AIA entitlement, based on the £100,000 annual cap, for the proportion of the accounting year falling before the relevant operative date
- The AIA entitlement, based on the new £25,000 cap, for the portion of the year falling on or after the relevant operative date
The writing down allowances for plant and machinery have also reduced from 20 percent to 18 percent for the main pool and from 10 to eight percent for the special rate pool. The special rate pool primarily contains integral features, cars with emissions of over 160g/km and long life assets.
As a result of these reduced allowances, it is important that you make the most of the short life asset rules, which allow for the wear and tear on any items of plant and machinery.
Therefore, if you expect an item to be replaced within eight years of being purchased, you can elect for it to be treated differently in terms of capital allowances, especially if the full AIA allowance has already been used.
The team at Moore Thompson can advise you whether such an election would be beneficial. This is particularly likely to be the case if the item is expected to depreciate in value faster than the associated capital allowances claim. When the item is sold or disposed of within the eight-year timeframe and a loss is made, it will result in a balancing allowance and a reduction in tax liabilities.
At Moore Thompson, we can advise you on how to make the most of the AIA scheme in order to ensure your investments are as tax-efficient as possible. For more information and to plan your capital investments more effectively, please contact us.
Capital Gains Tax
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Taxation Planning Services Team