The end of the accounting period for your business is a key point for tax planning.
You can save or delay tax by advancing the acquisition of assets to before the end of your accounting period. This permits you to claim the capital allowances associated with those
If you trade through a company, you can claim a super-deduction of 130% of the cost of new plant and machinery purchased before 1 April 2023. This super-deduction only applies to brand new equipment, including vans and trucks, but not cars.
Expenditure on new equipment fixed to buildings, e.g. lifts, air-conditioning and solar panels, can qualify for a special 50% deduction if purchased by April 2023.
Where the equipment is not brand new, or your business is a sole-trader or partnership, the cost of new equipment is likely to fall within the Annual Investment Allowance (AIA). This gives a deduction of 100% of the cost as a capital allowance in the year of purchase. The maximum amount that can be claimed under the AIA per year is £1 million until 31 March 2023.
Complicated transitional rules can apply for these allowances where an accounting period straddles 31 March 2023.
The cost of constructing, renovating or converting a commercial building to be used by your business qualifies for a 3% pa Structures and Buildings Allowance (SBA). Costs connected with residential accommodation don’t qualify for the SBA, nor do the costs of acquiring land or obtaining planning permission.
We can advise you about the type of capital allowance or tax relief for which your proposed expenditure will qualify.
What you should do next…
Review the timing of asset acquisitions to maximise capital allowances.