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BUSINESS WOMEN SCOTLAND business advice
ask the expert
CAMPBELL DALLAS • Tel: 0141 886 6644 • www.campbelldallas.co.uk • Titanium 1, King’s Inch Place, Renfrew, PA4 8WF
Aileen Gates is a partner at Campbell Dallas, Charterted Accountants.
Email Aileen with your financial queries and she will answer in following issues
of BWS magazine. e: [email protected]
The Time to Consider
Capital Allowances is now
Capital Allowances are often missed by small
businesses but could provide a generous tax
break on investment in plant and machinery. The
current regime means that 100% allowances are
available to most small businesses.
How do capital allowances work?
When buying plant and machinery for your business,
you cannot deduct this expenditure as an expense
in arriving at taxable profits for the year in which
the purchase is made. Without capital allowances,
businesses would not get any tax relief on plant and
machinery until the asset was eventually sold. Claiming
capital allowances is a way of spreading the tax relief
and allows a business to claim a deduction reflecting
the falling value of the asset over time.
Annual Investment Allowance (AIA)
AIA can be claimed on expenditure up to a total of
£500,000 per year on plant and machinery. Note that
cars used in business, although eligible for capital
allowances, are not eligible for AIA.
The AIA limit has varied over the last 5 years and is
now at the highest it has ever been. It is important to
utilise this allowance as soon as possible as the level
will reduce to £200,000 from 1 January 2016. Care must
be taken in dealing with the transitional rules where an
accounting period runs over this date.
What counts as plant and machinery?
Any asset owned by the business will qualify for capital
allowances if it is:
• movable plant used in the business or,
• an integral feature in the business premises.
Assets such as land and buildings, including doors
and mains water and gas systems are not counted as
plant and machinery. If you are a sole trader and use
the asset for both personal and business use, capital
allowances can be claimed on the business use part of
the asset.
Enhanced Capital Allowances (ECA)
Purchases eligible for ECA can also attract a 100%
deduction from your taxable profits. This can be
claimed in addition to the AIA and does not count
towards the AIA limit.
ECA can be claimed for energy and water efficient
equipment which features on HMRC’s Energy
Technology Product List and can be claimed on low
emission cars. Examples of purchases eligible for ECA
include energy efficient boiler equipment, hand driers,
refrigeration equipment and taps.
If you think you have incurred expenditure which
could have been eligible for capital allowances but
you have not claimed – it’s not too late. So long
as you still own the asset you can claim capital
allowances after purchase. n
Rates of capital allowances
Capital Allowances can be claimed at either 18% or
8% per year, on a reducing balance basis. The rate of
allowance varies depending on the type of asset.
In some instances, it is possible to claim 100% of the
cost of an asset in the year of purchase. This can be
done by utilising the Annual Investment Allowance and
Enhanced Capital Allowances.
Claiming capital allowances is a
way of spreading the tax relief
and allows a business to claim a
deduction reflecting the falling
value of the asset over time.
Post a question to Aileen on the BWS website at
www.bwsltd.co.uk/ask-the-expert