When a business invests in equipment or machinery, it receives tax relief through capital allowances. Currently, they benefit from the Annual Investment Allowance (AIA), which gives 100% tax relief for ‘plant and machinery’ investments. The 100% relief is currently capped at £100,000. However, this drops to £25,000 with effect from April 2012. Any expenditure over £25,000 will qualify for relief but only at 18% of the balance. Therefore, if you have any plans to buy large pieces of kit in the next couple of years, it makes sense to try and get it in before this date.
For vehicles, vans qualify as plant and machinery, but cars do not. Therefore, if you are thinking of getting a new vehicle for your business, it may be worth having a word with us first.
Also, if your business is a sole trader or partnership, AIA’s reduce your profit for tax purposes and also tax credit purposes. Therefore, if you claim tax credits and invest in plant and machinery – and remember this includes vans – not only will you reduce your tax bill, but you will also legitimately increase your tax credit claim (depending upon your circumstances).
As always, if you have any questions please do not hesitate to get in touch.
