Autumn Statement changes welcomed by Albert Goodman

Sheldon Cole

Sheldon Cole

Sheldon Cole, Tax Partner at leading South West accountancy firm, Albert Goodman, discusses the importance of new changes to annual investment allowances and how to maximise the potential benefits to your business.

One of the most welcome changes for businesses in the recent Autumn Statement was the increase in the Annual Investment Allowance (AIA) from £25,000 to £250,000.

This applies to plant and machinery purchased in the two year period from 1 January 2013 to 31 December 2014.

Notably, this amendment comes in the wake of severe criticism of the Chancellor earlier this year for reducing the then allowance of £100,000 to only £25,000 from April 2012.

100 per cent reduction

The AIA entitles businesses to a 100 per cent deduction against profits for the cost of purchasing capital equipment, plant and machinery in the year of purchase.

Most types of plant and machinery – such as computer and office equipment, vans, lorries, coaches, tractors, diggers and cranes – qualify for AIA. The main exception to be aware of is motor cars.

The timing of when expenditure is incurred is critical in determining a businesses’ entitlement to AIA, because different AIA limits apply, depending on when the expenditure was incurred.

The three relevant time bands are pre 1 April 2012 (which is relevant for companies with 31 January or 28 February 2013 year end), during the period from 1 April to 31 December 2012, or on or after 1 January 2013.

Mitigate the effect

Assuming the AIA level does revert back to £25,000 on 1 January 2015, as proposed, planning will need to be undertaken to mitigate the effect of the reduction. This is likely to involve accelerating capital expenditure before 1 January 2015 wherever possible.

I would recommend all businesses take advice from their accountant on how best to take advantage of the increases, be aware of entitlement levels and for tips on maximising AIA claims.

Self-assessment deadline looming

As well as tax planning, accurate tax compliance is equally important, particularly at this time of year, with the 31 January 2013 deadline for self-assessment looming.

With new penalties for late filing, it is more important than ever to ensure relevant data is gathered from banks, building societies and stockbrokers, appropriate records have been retained, all tax reliefs and credits are claimed, and returns are filed on time.

If you would like assistance with tax planning or you would like assistance with completing your tax return contact Sheldon Cole, Tax Partner at Albert Goodman on sheldon.cole@albertgoodman.co.uk.

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