Capital allowances – will he or won’t he.....

As things stand, the annual investment allowance (which gives a tax deduction for the cost of fixtures and machinery in the year of purchase) will reduce from £500,000 to just £25,000 from 1 January 2016 – a reduction of 95%. So if you are planning to purchase a new machine for £100,000, then you are likely to be better off buying it in mid December 2015 rather than early January 2016.

The Chancellor may announce in the Budget that the current annual investment allowance limit will be maintained, but he may not. In any case, with the possibility of a new Government from May (given that the current coalition is unlikely to be reformed!) there is likely to be a second Budget which may change the limit again.

As ever, timing and advice are critical as calculating the amount of annual investment allowance available isn’t easy, particularly where your business year end isn’t 31 December. You also need to take into account expenditure by associated businesses, what you’ve already spent to date in the current financial year, the type of expenditure and so on. Who is it that said “tax doesn’t have to be taxing....” ?

Therefore, if you are considering investing in plant and machinery, it may be appropriate to take advantage of the rules now.

As always, we are available to discuss your options and help make sure that you maximise the tax reliefs available to you.