Q: I’m looking to invest in new equipment or machinery for my business. How can I ensure that my investment is as tax efficient as possible?
A: If you qualify for the Government’s annual investment allowance (AIA), then there has never been a better time to invest in new plant or machinery for your business. This is because, as of January 1, you can now claim 1005 tax relief on £250,000 of capital expenditure incurred on eligible equipment.
This is a ten-fold increase on the previous threshold of £25,000, with Chancellor George Osborne announcing the change in his Autumn Statement In December 2012.
The AIA covers a wide range of purchases, from office equipment such as computers and furniture, to machinery such as printing presses, lathes and tooling machines. It also covers vans, lorries, trucks, cranes and diggers, as well as agricultural machinery such as tractors and combine harvesters. Of course, this list is not exhaustive, so you seek professional advice from an accountant to establish whether you qualify.
There are exceptions, however, including cars, which are subject to first-year allowances based on how low their CO2 emissions are, as well as any equipment which was previously used for another purpose and then brought into the business. Equipment gifted to your business will not qualify either, nor expenditure incurred in the accounting period in which your business ceases trading.
However, this increase will only last for the next two years, so business owners wishing to benefit from this generous tax relief should do so as soon as possible.
It is worth noting that the AIA threshold has fluctuated significantly since the allowance was first launched in 2008, having risen from £50,000 to £100,000 and then fallen to £25,000 before January’s ten-fold increase. It will return to £25,000 again from January 1, 2015, so you may wish to consider bringing forward your capital expenditure while this allowance is at this current higher level.
For further information on how your business can take advantage of the AIA, or any other appropriate tax relief, please contact Jon Stocker at firstname.lastname@example.org. For further information on any of Milsted Langdon’s services, please visit www.milsted-langdon.co.uk.