100% tax allowance has limited shelf life


At present purchases of qualifying plant and other equipment can be written off against your taxable profits.
Tax relief is obtained by utilising the Annual Investment Allowance. For the current tax year, 2011-12, this amounts to a 100% write off with a limit of £100,000.
As with most opportunities all good things come to an end! From April 2012 the annual limit is being reduced to £25,000.
So if your plans over the next year or so include substantial investment in replacing worn out, or buying new, qualifying equipment, timing is absolutely critical.
For companies, the Annual Investment Allowance will already be decreased from £100,000 as any accounting period that straddles 31 March will receive an Allowance Investment Allowance pro-rata between the £100,000 pre 1 April 2012 and £25,000 post 31 March 2012.
Given the way the new rules work regarding the hybrid calculation for periods overlapping the change, assets should, where possible, be acquired pre 1 or 6 April 2012 even if it still falls in the period that straddles the change. We cannot reiterate this point enough.
100% first year allowances are still available for specific items that qualify as energy or water saving technologies. Such assets have to appear on the Government's recognised list though.
Contact us if you would like more information about these changes.
Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.