Increased tax incentives for investment in plant, equipment and buildings

Businesses planning on acquiring or constructing new capital assets, e.g. plant, equipment or buildings, should consider the timing of their projects to ensure they maximise the tax reliefs available to them in the form of capital allowances.

There were a number of changes announced during the 2018 Budget that have increased the tax incentives open to businesses in relation to their capital expenditure.

Firstly, from 1 January 2019 the annual investment allowance (“AIA”) was increased for two years from 1 January 2019 from £200,000 to £1million. This means a business with a year end of 31 December can obtain 100% tax relief for up to £1million of expenditure on plant and equipment for each of the years ending 31 December 2019 and 31 December 2020. If your business’s year end is not 31 December there are additional rules to calculate the maximum amount of AIA to which your business would be entitled.

Secondly, a new tax relief will be available to businesses for eligible capital costs on new non-residential buildings and structures. Eligible capital costs include costs for new conversions or renovations. The tax relief will be given by way of Structures and Buildings Allowances (“SBAs”). SBAs will mean that businesses can obtain tax relief on eligible capital costs at a rate of 2% each year for 50 years. SBAs are available for expenditure incurred in relation to construction contracts that were entered into on or after 29 October 2018.

If you would like to discuss further how the recent changes to capital allowances may benefit your business, please contact Lucy Creese –