Capital Allowances
Changes to Capital Allowances
Changes to Capital Allowances
Major changes have been made to the system of tax allowances for capital expenditure incurred by trades, professions or vocations and businesses.
From 5 April 2008
The main changes are:
- Allowances relating to Agricultural or Industrial Buildings and Hotels are now being withdrawn.
- The writing down allowance (WDA) is reduced from 25% to 20% on the general plant and machinery pool;
- A new 10% special pool rate will be applied to integral features in a property (including commercial properties) and any existing long-life asset pool;
- The WDA for existing 'expensive' cars will be calculated as above with the existing cap of £3,000, new cars will be included in either the general or special rate pool depending on the level of CO2 emissions;
- A new Annual Investment Allowance (AIA) of 100% is available on the first £50k of expenditure in qualifying assets (excluding cars but including motor bikes) - special rules apply to groups and related businesses;
- Qualifying capital expenditure on new energy-saving plant and machinery qualifies for 100% enhanced capital allowances ECA - this includes low-emission cars;
- A 'small pools allowance' is available where the balance is less than £1,000;
From 6 April 2009
A temporary First Year Allowance of 40% will be available for qualifying expenditure in the 12 months starting on 6 April 2009.
Leased Cars
For new leases entered into, there will be no restriction to the lease rental deductible where CO2 emissions are 160 g/km or less. Where CO2 exceeds this level, a fixed disallowance of 15% will apply.
From 6 April 2010
The temporary FYA at 40% was extended for a further year.
AIA increased to £100k per annum.
From 6 April 2012
The 2010 budget of 22 June announced that from April 2012 there will be a reduction in the rate of Capital Allowances in the Main pool from 20% to 18% and in the Special Rate pool from 10% to 8%.
AIA to be reduced to £25k per annum.
For businesses whose chargeable period spans 6 April (income tax), a hybrid rate will have effect for unrelieved expenditure in any pool.
All above dates refer to unincorporated businesses, the effective dates for companies being 1 April.
Timing of Expenditure
The timing of expenditure may be critical in determining the level of allowances available.
The above details the more common allowances available - please contact me if you would like to discuss how the changes might affect you.