Time running out for extra tax breaks on business assets

Many businesses could soon miss out on the opportunity to claim early tax relief as they are not aware of major changes from next year.

The Annual Investment Allowance (AIA) is a form of enhanced tax relief, permitting a 100% write-off on the purchase of qualifying business assets (normally the tax relief against asset purchases is 18% or 8%, depending on the type of expenditure). In a bid to stimulate capital expenditure and boost suppliers’ and manufacturers’ order books, the Chancellor increased the maximum amount of expenditure to £500,000 but as announced in the Summer Budget this year, this will be capped at a permanent level of £200,000 from 1 January 2016.

Warns Julia Whelan, tax partner at Curo Chartered Accountants “Businesses affected by this reduction in relief will be those planning to spend in excess of £200,000 over the next few months on qualifying capital expenditure. I would urge these businesses to consider purchasing assets before 31 December in order to maximise their AIA”.

Qualifying capital expenditure covers most assets bought for use within the business and includes:

  • Computer hardware and qualifying software
  • Office furniture and equipment
  • Van, lorries and associated equipment
  • Machines used in the business, such as printers, tooling machines etc

Items not qualifying for the AIA include existing plant and machinery, land & buildings and cars. These lists are not all exhaustive and it is worth discussing planned expenditure with your accountant, to ensure the business’ entitlement to AIA is optimised.

For qualifying capital expenditure after 31 December 2015, 100% AIA relief is available on the first £200,000 bought in the year, with any excess attracting tax relief at the standard rates of 18% or 8%.

To find out how your business can maximise its entitlement to AIA, please contact Julia.whelan@curoca.co.uk or call 01527 558539..

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