The rules on capital allowances have been changed and are now generous towards most small businesses. If you are thinking of investing in assets that qualify for the Annual Investment Allowance (AIA) during 2009-10 it is worth bearing in mind the additional relief you can claim to take advantage of the 40% First Year Allowance (FYA) that is available for one year to 5 April 2010 (1 April 2010 if you trade as a company.)
For most businesses the only assets that do not qualify for the AIA or the FYA are motor cars. Although don’t forget that if you buy a car with CO2 emissions under 110g/km a special 100% allowance can be claimed.
The AIA allows you to write off 100% of qualifying expenditure during 2009-10 up to a total spend of £50,000.
But what happens if you spend more than £50,000? Let’s say you invested £80,000 during 2009-10 in assets that qualify for the AIA and FYA. You would be eligible to claim the maximum £50,000 AIA and a 40% FYA on the excess. This would make your potential, combined claim £62,000, or an overall 78% tax write down in one year.
Even if the claims created net tax losses in 2009-10 this may enable your business to recover some of the tax paid in the previous three years.
Please call if you need more information on this topic, particularly, does your intended investment in new equipment qualify for these reliefs?