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Capital Allowance Relief is Changing – Use it or Lose it
By Christopher J Sherliker

If you own commercial property, you need to act quickly to claim tax savings on assets bought for use in your business. The treasury is planning to change the rules in April 2012 in a way that will significantly limit the tax reliefs available. Property and Licensing Partner, Maria Guida explains.

Maximising capital allowance claims can lead to large tax savings, but the rules are changing next year and you need to move fast to avoid losing out. Capital allowances give tax relief for the reduction in value of qualifying assets that you buy and own for business use, by letting you write off their cost against the taxable income of your business

Maximising capital allowance claims can lead to large tax savings, but the rules are changing next year and you need to move fast to avoid losing out. Capital allowances give tax relief for the reduction in value of qualifying assets that you buy and own for business use, by letting you write off their cost against the taxable income of your business.

Qualifying assets include commercial vehicles, computers, printers, desks, tools, plant and machinery, and other equipment.

It is not only assets that capital allowances affect. The relief can also apply to certain embedded fixtures within the building itself, such as lifts, air conditioning, toilets, electrics and cold water systems.

It may also be possible to claim capital allowances on qualifying improvements and other capital expenditure that the business has incurred since purchase.

As long as your business is still trading and owns and uses the asset in question, there is currently no time limit for making capital allowances claims.

The annual investment allowance also gives 100 percent tax relief on all qualifying expenditure in the year of purchase, up to a maximum of £100,000.

HMRC are set to announce changes in next year’s April 2012 budget, which will severely restrict the time limits for making such claims.

Also, the annual investment allowance is being reduced from £100,000 to £25,000 for expenditure incurred on or after 1st April 2012 for companies and 6th April 2012 for the self-employed in business.

So if you have simply not got round to making a capital allowances claim, secure in the knowledge that this can be done at a later date (and it is not uncommon for capital allowances claims to be made on expenditure incurred some years ago), this is no longer the case as time is running out.

You may also have put off a significant purchase of a business-related asset or improvement for the time being. However, if you delay this purchase until after 1st or 6th April 2012, the ultimate cost to your business could be substantially more, as a significant proportion of the relief that is currently available will be diminished. There is currently a golden opportunity for businesses who are considering investing in upgrading their equipment and premises to maximise the higher relief available and minimise the investment cost.

We work with firms of accountants who have specialist capital allowances tax expertise. Please contact us if you would like to discuss any potential claim, or if you would like an introduction to a specialist capital allowances tax accountant for expert advice on what could amount to a significant tax saving.

Added: 8th November 2011

Christopher J Sherliker is a partner for Silverman Sherliker LLP who provide legal solutions across a spectrum of requirements.  Find out more about Silverman Sherliker LLP.

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