Capital Allowances

February 18th 2015

Annual Investment Allowances (AIAs) allow the whole cost of machinery and vehicles (other than cars) to be written off, for tax purposes, in the year of purchase. There is an annual ceiling on the maximum qualifying expenditure, which is currently £500,000, but which is scheduled to fall by 95%, to just £25,000, on 1 January 2016.

The important point to bear in mind is that the allowance is appointed to accounting years. For example, if a company’s accounting date is 30 September, the maximum qualifying expenditure for the year to 30 September 2015 will be £500,000, but that for the year to 30 September 2016 will be only £143,750 (3/12ths of £500,000 plus 9/12ths of £25,000). Thus it is certainly not the case that every company has until 31 December 2015 to make a qualifying £500,000 investment.

There are also some very complicated rules for determining when expenditure is, for capital allowance purposes, ‘incurred’ - it is not, normally, either the date you place the order or the date you sign the cheque. Accordingly, if you are planning a programme of capital expenditure, or a significant asset purchase, we strongly urge you to contact DSC Chartered Accountants in Harrogate for detailed advice at the earliest possible stage.