Monthly Focus August 2014

You Could Pay Less Tax This Year – Business Reinvestment

Annual Investment Allowance  
This month I would like to talk about the generous tax savings available for the purchase of Plant and Machinery. I start by looking at the Annual Investment Allowance.
The Annual Investment Allowance has been around since April 2008 and many business owners have benefited from reinvesting money into their business by way of assets and then reducing their tax bill in the process, but there is still uncertainty with some business owners around whether or not the entitlement extends to them and whether the allowance is still here.

The Facts:-
•    The Annual Investment Allowance is available to all business owners whether trading through a Limited Company, Partnership or as a Sole Trader.

•    The Annual Investment Allowance limit is £500,000 as from 1 April 2014 but is calculated on your trading year end.

So what does this mean:-
•    You can claim 100% of the cost of purchasing certain Plant and Machinery against taxable trading profits and reduce your tax bill

•    If you have not made a profit, an adjustment to the tax computation can be made to roll back the loss incurred or roll it forward for future use

Who does this relate to:-
•    Anyone running a business

So if you are thinking of investing in Plant and Machinery, now is the time to do it but, what about cash flow?
OK, so you know you need a new piece of equipment but you don’t have the cash to spend, so how are you going to finance this?

This is a question I am asked regularly.
Q: Can I still have the allowance if I buy the asset on hire purchase?
A: Yes

Assets purchased on finance are eligible to the same treatment as an asset purchased outright, so if you buy a machine on finance, it is still capitalised and the whole cost is deducted from the profit straight away.

An example of this is:-
A Ltd Company with Taxable Profits of £50,000 paying Corporation Tax at 20% buys a machine costing £20,000.

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Going Green
Don’t forget that any investment which is approved environmentally friendly or energy saving also qualifies for 100% first year allowances.

And Cars
Cars do not qualify for the Annual Investment Allowance but Vans do!

However, Cars with zero or very low C02 emissions could qualify for 100% first year allowances.

For more information about purchasing assets and whether or not that asset would qualify, contact me. I would be happy to hear from you.
See you next month for our next edition and don’t forget to let me have your questions so I can build an interesting focus for next time.