Changes in rates of Capital Allowances available from Spring 2012

Businesses are set to miss out on tax relief for investment in Plant and Machinery, if they do not think carefully about the timing of any Capital Asset purchases they are planning this spring.  Changes are set to take place from April 2012 reducing the amount of tax relief a business can claim.

Since April 2010 a business could set off up to £100,000 of expenditure on plant and machinery against profit each year by claiming an Annual Investment Allowance (“AIA”).

From April 2012 this £100,000 limit is being reduced to £25,000.  Any expenditure on plant and machinery over £25,000 will generate tax claims at 18% or 8% depending on the type of asset.  Instead of claiming full tax relief in one year it might take up to 20 years for a business to receive full tax benefit.

The bad news doesn’t stop there though.  If you have an accounting year that straddles April 2012 the amount of AIA you could claim against plant and machinery will be significantly reduced if you buy the asset after 1 April 2012.  Any business with a 30 April year end that is thinking about investing in Plant and Equipment this spring, should carefully consider the timing of the transaction.  Up to £93,169 of AIA could be lost, simply by purchasing the asset in April, rather than in March.  If you would like to discuss this in more detail, please email Andrew Grant or call him on 01246 208282

Speaking to us and planning this now could save you thousands off your next tax bill.