At the end of the current fiscal year, 5 April 2012 for income tax payers and 31 March 2012 for companies, the current level of Annual Investment Allowance is being reduced from £100,000 to £25,000.
If your accounting year end coincides with the fiscal year end this presents no computational difficulties as all qualifying expenditure, for the year ending 5 April (31 March) 2012, up to £100,000 will provide a 100% deduction for income tax and corporation tax purposes.
But what happens if your trading year end straddles the fiscal year end?
The short answer is that AIA relief is apportioned. In certain circumstances this can result in a loss of relief and higher tax bills.
Consequently if your trading year does not end 5 April (31 March) 2012, and you are contemplating significant capital expenditure in this period you should, where possible, bring forward capital expenditure.
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 tax factsheet, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
If you like this article and would like to subscribe to INSPIRED, our FREE monthly newsletter, then please click SUBSCRIBE.Subscribe