Businesses that are planning capital expenditure in the short to medium term need to be aware of changes to capital allowances for plant and machinery acquired on or after 1 April 2012 (for companies) and on or after 6 April 2012 (for unincorporated businesses).
After this date there will be a significant reduction in the annual investment allowance for qualifying expenditure which potentially could result in lost 100% up-front tax relief.
Claiming on the balance not covered by AIA at rates applicable to the general, special or short-life asset pools spreads the claim for tax relief over much longer periods.
Here is an example I’ve seen from accountants Smith & Williamson:
Using an example of a 30 June 2012 year end, the table below shows the effect of delaying expenditure until after 1 April 2012 or 6 April 2012 on the maximum amount of AIA claimable for that year.
| Company | Unincorporated business | |
| Maximum allowance if expenditure incurred before date of change |
£81,370 | £82,393 |
| Maximum allowance if expenditure incurred after date of change |
£6,233 | £5,890 |
Businesses need to consider more than just the availability of allowances when incurring expenditure, however this change in allowances is significant enough to justify very careful consideration of when to incur qualifying expenditure.
For more information, please email me on shimon.shaw@mablaw.com.