Annual investment allowance??

[Matthew Storrs]

Anyone know anything about this, as i understand it, if you buy a piece of machinery for £6000 for example you can claim fully for this amount in one accounting year ie- put it agaisnt your expenditures. The allowance is up to £25000 per year. The way i see it if a small company like mine was to purchase a large amount of machinery in one year could easily end up paying no income tax at all- or have i got this wrong?

[michaelknapp]

thats correct what you are saying i am thinking the same as you having a shopping spree followed by no tax bill but watch the following year they might sting you on tax

[Arboreal]

Your basic options are using your AIA to put 100% of the cost of equipment against tax or putting a percentage in every year until the full cost of the equipment is covered (the percentages can often change in the budget but for 2011 - 12 was something like 20% the first year then 18% until all accounted for). The logic is you can spread the joy of a big purchase against tax for a few years rather than using it all up in 1 year. It also takes into account depreciation but that bit is hazy in my memory 'cos I tend to use AIA as it's a million times easier!

[GardenKit]

My own feeling is that it may be a bit short sighted, unless you have need for extra cash this year.

I have just bought a £12K van, but if I put it all against tax in one year i will have higher tax bills over the next few years.

 

I would prefer to spread it

[willburt]

According to my accountant the annual allowance has been put up to £100000. It was £25k. If you spread the allowance it is spread over several years after the tax year and you still end up paying tax. Depends if you plan on buying more equipment each year, I took the whole allowance last year.It was only £25k this year and I plan on buying more equipment so it would've pushed over that boundary but now they have moved the allowances to £100k.

[Paul Jenks]

Annual investment allowance

Most businesses can claim an annual investment allowance for expenditure of up to £100,000 a year on most plant and machinery, apart from cars. In many cases (depending on your level of expenditure) this may mean that you can claim your entire expenditure on qualifying items against this allowance. A reduction in the annual investment allowance to £25,000 a year from 1 April 2012 for Corporation Tax, and from 6 April 2012 for Income Tax has been announced, subject to legislation.

 

Annual investment allowance only applies for expenditure incurred on or after 1 April 2008 for Corporation Tax or 6 April 2008 for Income Tax. There is more information in this guide on annual investment allowances.

 

Straight from the hrmc.gov website. Go to capital allowances. There are also bigger allowances for start ups in their first year.

 

If your accountant tell you all you need to know in an easy to comprehend way that is up to date for no charge other than his/her annual fee,change accountants.

[Matthew Storrs]

My own feeling is that it may be a bit short sighted, unless you have need for extra cash this year.

I have just bought a £12K van, but if I put it all against tax in one year i will have higher tax bills over the next few years.

 

I would prefer to spread it

 

I would tend to agree- if its a one of purchase then definiataly best to spread it otherwise if you claim all in one year you may not gain maximum benefit, I intend to upgrade all my machinery over the next 4 years so if i do one machine per year for the next four years it should work out quite well for me. But i guess even small things like chainsaws would count as 'plant and machinery' so they too would be included in the Anunual investment allowance.

[Robert McTurk]

The annual investment allowance was put up to £250000 for next 2 year from the 1st of January

[Minotaur]

How does it work if you spread it = how much can you claim, over how many years, percentage or amount/valur, etc, etc??

 

Wondering as having a difference of opinion with my accountant and I think I am right! But not sure I fully understand

 

Scenario: Buy van £10,000 - can claim £10,000 in that tax year against Tax, under the AIA rulling

or if spreading - how would that calculate?

 

Thanks in advance

 

Chris

[Billy]

First post is nigh in correct capital investment allowances, the best part for me is you lose the tax but it doesn't damage your net profit which is what mortgage lenders look at.