The clock is ticking on Capital Allowances

Farmers and rural businesses now have less than nine months left to make full use of the current super-deduction before this temporary tax relief ends in March 2023.

Launched in 2021, this temporary Capital Allowance allows firms investing in qualifying plant and machinery assets to benefit from a generous tax allowance that reduces their taxable profits, thus minimising their Corporation Tax bill.

Thanks to the super-deduction, companies have been able to claim allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

This allows companies to cut their tax bill by up to 25p for every £1 they invest. Most companies also benefit from a 50 per cent first-year allowance for qualifying special rate assets.

To benefit from the relief, the assets purchased must be new and not second-hand or refurbished equipment.

Unfortunately, the relief is only available to incorporated companies, but unincorporated businesses, such as partnerships and sole traders, can continue to benefit from the Annual Investment Allowance (AIA) which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

However, this allowance will also be reduced from 31 March 2023 to just £200,000, which means that companies have less than a year left to enjoy these generous Capital Allowance schemes and should act now to plan their investments wisely.

Where expenditure takes place over more than a single tax year, these allowances may need to be apportioned to account for this, making matters even more complicated.

It may be beneficial, in some cases, to bring forward planned expenditure for future years to take advantage of these schemes in the current tax year.

To find out how your business can reduce its tax bill, while supporting investment, please speak to us.