Tuesday, 17 March 2009

Time For Some Last Minute Tax Planning?

For many, particularly the self employed, 31 March / 5 April is not only the tax year end, but also the financial year for their accounts. For those of you in that position, there are only a couple of weeks left to get in any last minute items of tax planning.

Most of us have heard of capital allowances. They are, effectively, a ‘wear and tear’ allowance give by HMRC to help us claim the cost of our major purchases of capital equipment, vehicles etc over a number of years.

What many do not realise, though, is that, in April last year, the Finance Bill 2008 introduced ‘Annual Investment Allowance’ for the first time.

Under the provisions of this allowance, any business (sole trader, partnership or limited company) can, from April 2008, claim 100% of the cost of their new equipment in the year in which it is incurred, up to a maximum of £50,000 of capital expenditure.

For those of us with a year end coming up, it’s definitely worth a look. Whilst I would never advocate buying equipment unnecessarily, just to save tax, if you do have any imminent capital expenditure on the horizon, I would give some serious consideration to getting it in before your accounting year end.

By way of clarification, if the company profits for the year are £15,000, and you purchase a new piece of equipment, costing £10,000, on the last day of the year, you will be able to reduce your taxable profit down to just £5,000 (in spite of the fact that you have not had the equipment for the whole year)!

Food for thought I think.
Further guidance on this is available in HMRC Guidance Booklet BN12:


Glenn said...

As always excellent info and advice, Alan.

Alan Young said...

Thanks Glenn.

Glad you approve.


nice planing