Consider the timing of Capital Allowances

Richard Cartwright, a partner of Saffery Champness Landed Estates & Rural Business Group, says: "At the moment, the annual investment allowance (AIA) allows you to claim 100% for £100,000 invested in plant and machinery in the tax year to 5 April 2011. This is also the case for the tax year to 5 April 2012.

"However from 6th April 2012 the AIA is to be reduced to £25,000 with any excess expenditure only being able to benefit from the writing down allowance. The writing down allowance rates are also set to change. For many years this has been at a rate of 25%, this was recently reduced to 20%. From April 2012 it will reduce down to 18%. For specific items including features integral to a building, this is reducing from 10% to 8%.

"Where a business has a year end that does not coincide with the tax year, the AIA is apportioned. For example a 30 June 2012 year end the AIA available in the year will be £81,250 (9/12 x 100,000 + 3/12 x 25,000)", explains Richard Cartwright.

"Furthermore in the part of the accounting period falling after 6 April 2012, only a maximum of £25,000 would be covered. The period as a whole attracts relief of up to £81,250, but for expenditure on plant and machinery in excess of £25,000 this should be purchased before 6 April 2012. Those businesses that are considering any major equipment purchases would be well advised to consider the timing of these, to maximise the allowances available. AIA is invariably a complex matter and it is always sensible to take professional tax advice when assessing any allowance".