CAPITAL ALLOWANCES – ARE YOU CLAIMING EVERYTHING YOU CAN?
UK companies are apparently losing billions of pounds on capital allowances each year. This article will help you understand where you and your business could be claiming.
What are capital allowances?
The capital allowance regime allows a business to get tax relief on capital expenditure which would normally not be tax deductible, by allowing it to be offset against profits made in the year.
Capital allowances definition
For most companies, their normal capital expenditure will cover things like plant & machinery, fixtures and fittings, and motor vehicles. You can also claim on integral features such as lifts and escalators.
Do note that the cost of buildings and properties will not attract capital allowances although part of a building may qualify as an integral feature or fixture.
Conditions for claiming
- Assets must be items that are used by the business on an on-going basis and not purchased for resale
- The asset must be expected to serve a purpose for at least longer than a year
- Any asset must be purchased purely for business purposes
How do I find out what types of expenditure qualify?
Everyday assets that you may purchase and that will qualify for capital allowances include:
- Computers and computing equipment
- Specialist machinery
You can also claim capital allowances for:
- Renovating business premises
- Extracting minerals
- Research & development
- Intellectual property expenditure
If you let out residential property you can only claim if your business qualifies as a furnished holiday lettings business. In each year the property must be:
- Available for holiday letting for 210 days
- Let for 105 days or more
For more information on these you can use this link:
How do I claim capital allowances?
They must be claimed in your tax return and they must normally be claimed by 12 months after the 31 January filing deadline for the return.
Annual Investment Allowance:
You can deduct the full value of an item that qualifies for AIA (The annual investment allowance). The AIA provides 100% tax relief on assets qualifying as plant and machinery, subject to an annual maximum (excluding cars).
Between April 2008 and January 2016 the AIA amount changed several times.
If the AIA changed in the period you’re claiming for, you need to adjust the amount you can claim.
|From 6 April 2010 to 5 April 2012||£100,000|
|From 6 April 2012 to 31 December 2012||£25,000|
|From 1 January 2013 to 5 April 2014||£250,000|
|From 6 April 2014 to 31 December 2015||£500,000|
|From 1 January 2016||£200,000|
You get a new allowance for each accounting period.
Why your business should be taking advantage of capital allowances:
Capital allowances are a legal way of claiming money back from your tax bill, the option is there and it’s open to all. Thousands of businesses don’t take advantage of this each year and it’s costing them money.
If you are unsure as to whether your business is maximising the opportunities that capital allowances provide, do get in touch with our Managing Partner Melanie Richardson to discuss how we can help.
How to calculate your taxable profits:
HMRC Capital Allowances Information:
Capital Allowances Manual:
If you are interested in discussing what your business should be claiming, please get in touch with our managing partner Melanie Richardson
Melanie Richardson - Managing Partner
Tel: 01825 763 366
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