Capital Allowances

Maximizing Tax Relief for Capital Expenditure

At TAXCA Accountants Ltd, we understand that capital expenditure can significantly impact your business's financial health. While the cost of purchasing capital equipment is not a revenue tax-deductible expense, tax relief is available through capital allowances. These allowances can vary based on the type of asset acquired, and our team is here to help you navigate these complexities.

Overview

Capital allowances provide tax relief for specific capital expenditures. Here are some key points to consider:

• Types of Expenditure: Capital allowances apply to various assets, including machinery, equipment, furniture, and fixtures. Note that special rules exist for cars and certain environmentally friendly equipment.
• Annual Investment Allowance (AIA): The AIA offers a 100% deduction for the cost of most plant and machinery (excluding cars) up to an annual limit of ￡1 million. If your business spends beyond this limit, additional qualifying expenditure attracts an annual writing down allowance (WDA) of 18% (or 6% for special rate pools).
• Full Expensing: Starting from 1 April 2023, companies investing in qualifying new and unused plant and machinery can claim a 100% first-year allowance on most new plant and machinery.
• Pooling Expenditure: Expenditure on most items is pooled rather than treated individually. The main rate pool attracts an 18% WDA on qualifying expenditures.
• Structures and Buildings Allowance: Expenditures related to business-related buildings and structures qualify for an annual 3% writing down allowance on a straight-line basis.
• Special Rules for Cars: Cars are not eligible for AIA or full expensing, and the treatment of car expenditure depends on CO2 emissions.

Capital Allowance Claims

Both unincorporated businesses and companies must make claims for capital allowances in their tax returns. Claims can be complex, and we advise you to consult with us to ensure you maximize the allowances available to your business.

How We Can Help

Navigating the rules for capital allowances can be intricate. If your business is in the United Kingdom, TAXCA Accountants Ltd is here to assist you. We can compute the allowances available to your business, ensure that the most advantageous claims are made, and advise on the timing of purchases and sales of capital assets.

For further advice and support, please contact us at TAXCA Accountants Ltd. Together, let’s maximize your capital expenditure tax relief!