Capital Allowances on Plant & machinery
The Summer Finance Bill 2015 increases the permanent Annual Investment Allowance limit to £200,000 from 1 January 2016. It was scheduled to decrease to £25,000.
Where a business has a chargeable period that spans 1 January 2016, the maximum allowance for that business’s transitional chargeable period comprises 2 parts:
(a) the Annual Investment Allowance entitlement, based on the temporary £500,000 annual cap for the portion of the period falling before 1 January 2016
(b) the Annual Investment Allowance entitlement, based on the £200,000 cap for the portion of the period falling on or after 1 January 2016.
Example
A company with a 12 month chargeable period from 1 April 2015 to 31 March 2016 would calculate its maximum Annual Investment Allowance entitlement based on:
(a) the proportion of the period from 1 April 2015 to 31 December 2015, that is, 9/12 x £500,000 = £375,000, and
(b) the proportion of the period from 1 January 2016 to 31 March 2016, that is 3/12 x £200,000 = £50,000.
The company’s maximum Annual Investment Allowance for this transitional chargeable period would therefore be the total of (a) + (b) = £375,000 + £50,000 = £425,000, although in relation to (b) (the part period falling on or after 1 January 2016) no more than £50,000 of the company’s actual expenditure in that part period would be covered by its transitional Annual Investment Allowance entitlement.
Therefore, if you have an accounting date of 31 March 2016 and you plan to spend more than £50,000, you should incur the expenditure on or before 31 December 2015 if you want to maximize the tax relief.
If you would like further information on Capital Allowances or other Taxation issues please contact
If you would like to discuss this issue further please do not hesitate to contact us:
Email: robert.salenius@hghyork.co.uk, nigel.atkinson@hghyork.co.uk, paul.morris@hghyork.co.uk or call 01904 655202.
robert.salenius@hghyork.co.uk or call 01904 655202.
