Expenses incurred when purchasing capital equipment for business are not a revenue tax-deductible expense. However, there is tax relief available on certain capital expenditure in the form of a capital allowance.
The claimable allowances available depend on what the items you are purchasing. The way an item is brought does not generally influence claimable capital allowances. Below are the different types of expenditure that qualify for capital allowances:
Plant and machinery
Items such as: machines, equipment, furniture, certain fixtures, computers, cars, vans and similar equipment in your use of business.
The Annual Investment Allowance (AIA) allows of a deduction of 100% of plant and machinery costs. Providing the item is owned by a business, is available to most businesses and isn’t a car, the item is claimable under AIA. When purchases exceed the AIA threshold, a writing down allowance is due on any excess in the same period.
Pooling of expenditure allowances due
· Expenditure on all plants and machinery is to be pooled, rather than calculated on each item.
· Allowances are calculated for each accounting period of the business
Non- business use elements
Some business assets, such as cars, are used only partly for work-related purposes. In this instance allowances are apportioned so that the portion of the item that exists for work-related reasons is allowable, but not the personal-use portion.
Short life assets
Short life assets are items you intend to keep or only a short period of time. Allowances for short life assets are calculated separately to your pooled assets.
Long life assets
Long life assets are assets that are expected to be in the use of your business for 25 years or more.
How we can help
The rules for capital allowances can be complex. Our team of expert accountant specialise in making the most advantageous claims for our clients. Contact us for more information.