Page 15 - Addition Autumn 2017
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ARE YOU MAKING THE MOST OF CAPITAL ALLOWANCES?
Businesses looking to purchase capital equipment are able to claim tax relief in the form of capital allowances. Here we outline some of the key details.
What is the Annual Investment Allowance? Businesses purchasing plant and machinery
are able to make use of
the Annual Investment Allowance (AIA), which allows the costs for equipment, machinery and business vehicles (excluding cars) to be deducted from pro ts before tax. Available to businesses of all sizes and most structures, the maximum annual amount of the AIA is £200,000.
Under this scheme, plant and machinery includes items such as machines, equipment, and furniture, but excludes buildings, land and structures, and items that you lease.
Cars and some speci c ‘environmentally friendly’ equipment are subject to special rules outlined below.
Enhanced Capital Allowances
In addition to the AIA, a 100%  rst year allowance is also available on energy- saving or environmentally friendly equipment. A
separate Enhanced Capital Allowances (ECA) scheme is available for new electric and low carbon dioxide (CO2) emission cars.
Writing down allowances
A writing down allowance (WDA) of 18% is available for related expenditure that exceeds the AIA limit, or where the AIA has already been reached on other purchases. Certain AIA- qualifying ‘integral features’ (such as lighting, air conditioning, and heating) are only eligible for an
8% WDA.
Motor vehicle expenditure
With regard to capital allowances, special rules govern the treatment of expenditure on vehicles. Cars do not qualify for
the AIA, but are counted in a business’s capital allowances. The level of capital allowance, ranging from 8% to 100%, is dependent on the CO2 emissions of the vehicle. Other speci c types of vehicle are treated as pool, plant and machinery.
How do I make a claim for capital allowances? Businesses are required
to make a claim for capital allowances through their tax return. Unincorporated businesses must make a claim within 12 months after the 31 January tax return  ling deadline. Companies must ensure that their claim is made within two years of the end of the accounting period.
If you are considering investing in plant and machinery, please talk to us  rst as we can help to ensure that you time your purchase to receive the maximum tax bene t.
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