Capital Allowance Planning – tax relief on IT

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Capital Allowance Planning – tax relief on IT

December 12, 2013

 

We’ve invited Howard Worth Chartered Accountants to explain how expenditure on IT may qualify as a tax allowance.

Annual Investment Allowance (AIA)

From 1st  January 2013, the rate at which businesses receive relief for capital expenditure was temporarily increased – for both companies and unincorporated businesses, the annual investment allowance available to businesses was increased to £250,000, for a two year period. After this two year period, the allowance will revert to £25,000 per year.
 
The AIA gives tax relief at 100% for qualifying expenditure up to the AIA limit. Qualifying expenditure broadly being capital expenditure that would normally qualify for writing down allowances (in either the main pool or the special rate pool), excluding expenditure on cars.

What does this mean?

The increase was brought in by the Government to encourage the economy to recover, by giving businesses a tax incentive to invest in plant & machinery. Many common business assets such as office equipment (including IT), furniture and machines or tools, may be considered to be plant and machinery for capital allowance purposes, and expenditure on them might qualify for plant and machinery allowances. Essentially, this increase in the AIA limit means that it will be quicker for businesses to receive full tax relief on its capital expenditure, therefore reducing the tax bill and improving cashflow.
 
Further information: If you would like to discuss the potential implications of the capital purchases on your business with one of the experts at Howard Worth, please feel free to contact them using the details below:
 
David Evans
Tax Manager
Howard Worth Chartered Accountants
Tel: 01606 369000
Email:  davidevans@howardworth.co.uk
 
Andrew Hague
Partner
Howard Worth Chartered Accountants
Tel: 01270 626162
Email:  andrewhague@howardworth.co.uk