The end of the accounting period for your business is a key point for tax planning.
You can save or delay tax by advancing the acquisition of assets to before the end of your accounting period. This permits you to claim the capital allowances associated with those assets earlier.
If you trade through a company, you can claim a super-deduction of 130% of the cost of most new plant and machinery purchased before 1 April 2023. This super-deduction only applies to the cost of qualifying new equipment, which includes vans and trucks but not cars.
Expenditure on new equipment fixed to buildings, e.g. lifts, air-conditioning and solar panels, can qualify for a special 50% deduction if purchased before 1 April 2023. These assets would normally only qualify for a deduction of 6% per year.
If your accounting period straddles 1 April 2023 the super-deduction is pro-rated for that period, which can be complicated. Please ask us to check the level of deduction for which your company will qualify.
Where the equipment is not brand new, or your business is a sole tradership or partnership, the cost of new equipment is likely to fall within the Annual Investment Allowance (AIA). This gives a deduction of 100% of the cost as a capital allowance in the year of purchase. The maximum amount that can be claimed under the AIA per year is £1 million, which will be more beneficial for companies that claiming the 50% allowance referred to above.
The cost of constructing, renovating or converting a commercial building to be used by your business qualifies for a 3% pa Structures and Buildings Allowance (SBA). Costs connected with residential accommodation don’t qualify for the SBA, nor do the costs of acquiring land or obtaining planning permission.
We can advise you about the type of capital allowance or tax relief for which your proposed expenditure will qualify.