Date posted: 17th Mar 2022
Capital allowances essentially provide tax relief on the acquisition of equipment such as motor vehicles, vans, trucks, machines, computers and so forth.
At the moment, the “super deduction” provides a generous amount of tax relief for such expenditure by limited companies (https://www.cliveowen.com/2021/10/are-you-missing-out-on-the-super-deduction/) excluding cars. The deduction will cease on 31 March 2023. If you have an accounting period that straddles this period, you will receive a pro-rata amount of the 130% deduction. Is it worth considering bringing forward expenditure ?
Due to the increase in corporation tax rates from 1 April 2023 (to possibly as high as 26.5%), it will mean that any sale proceeds from the sale of equipment could be taxed at a higher rate than you have received on the expenditure. For instance, you may have acquired a specialised machine in 2019 for £100,000. Let’s sat that you sell that in 2024 for £100,000 (unlikely, yes!) but you would have received £19,000 tax relief (maximum) initially but could end up paying £26,500 (max) in tax, on the sale proceeds. Is it worth considering selling the asset (if it is not needed) whilst the tax rate remains at 19% ?
Are you in the process of either extending or buying business premises – if so don’t forget to get us involved at the outset as there may be opportunities to save tax via claiming capital allowances (which need to be included in the purchase agreement).
Finally electric cars are proving to be popular – there is a 100% tax relief available on the acquisition of electric cars, where certain conditions are met.
If you have any queries regarding capital allowances, please give us a call.