What are Capital Allowances?
This is a tax credit that you can claim based on business-related expenses. There are several different forms of capital allowances that businesses in all industries could claim against their taxes.
Capital Allowance Review Service can give you a clear idea about the many different forms of capital allowance so that you can maximize the credit available.
How are Capital Allowances Decided?
Each year, there is a list of tax laws you can consult to see all of the possible allowances you can claim. These laws are subject to change each year, so you need to make sure you have the most up to date information.
The legislation applicable to Capital Allowances is complex therefore we would encourage you to contact Capital Allowance Review Service for support.
What are the Advantages of Claiming Capital Allowances?
There are several reasons why you should keep capital allowances on your radar. Here are some of the main benefits of using them:
- It Increases the Chance of Getting a Refund and Lowers Your Tax Bill
You are better able to build wealth when you can lower how much money you pay in taxes each year. By maximizing your allowances, it will reduce your overall tax obligation — potentially to the point of getting a refund.
Either way, Capital Allowance Review Service will work alongside you and your advisers to reduce your tax bill and handle your accounting requirements.
- You Free Up Some Cash Flow That You Can Use in Your Personal Life or Business
Once you get a tax refund or lower your tax bill, this means more money in your pocket that can be used how you see fit.
This increase in cash flow can be useful as a means of personal cash flow or giving you money that you can reinvest into your business. Either way, you’ll have an opportunity to use this extra influx of cash to your benefit.
- It Can Boost the Economy and Even Protect the Environment
One of the underlying purposes of this tax credit is for you to re-invest in the economy. This allows for a healthy business and helps to support the services in your area.
In many cases, these credits are also used to encourage companies to make eco-friendly upgrades, which is great for the environment as a whole.
What are the Different Types of Tax Treatment that come under Capital Allowances?
But what kind of capital allowance is available and how should the expenditure be treated for tax? Here are a number of different areas that you can look into:
- Purchase of New Assets and Property
One of the more common forms of capital allowance is when you have purchased a new property. If you have invested in a business asset like a new building or new equipment, it could potentially be deductible on your taxes.
Acquiring or improving a commercial property is the key trigger for Capital Allowance Review Service to apply their process and expertise.
- Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) allows 100% of the Capital Allowances to be crystallised however there are limitations that can change from one year to the next.
Businesses that invest in assets e.g. property, machinery & equipment, etc could possibly use Capital Allowances to deduct taxable profits. Whether you run a sole proprietorship, partnership or corporation, AIA is very useful.
- Writing Down Allowance (WDA)
This can often be the default treatment when all other options have been explored. When certain allowances are not claimed in prior tax years, you can still claim Capital Allowances at a later date, as long as you have records.
- Research and Development
If you specialize in research and development, you may also be eligible to claim the Research and Development (R&D) tax relief claim.
Throughout the course of any business that you run, there will be a number of products and ideas that go into production. They involve research and development, which often require significant capital investment.
Keep track of all of these expenses and do your best to get reimbursed by using this form of tax relief.
- First-Year Allowance
It’s also crucial that you get to know what First-Year Allowances are available. Annual Investment Allowances is a good example of a First-Year Allowance.
First-Year Allowances open significant tax savings opportunities however can have time deadlines and level restrictions.
With capital allowances, you’re encouraged to invest in new assets and equipment for your business. This could mean everything from physical assets and equipment to investments made into new technology for your business.
File Your Capital Allowance Claim
These tips will let you know more about capital allowances and how it’s important to treat your expenditure in the most tax-efficient manner.
Capital Allowances is a complex area that Capital Allowance Review Service has for many years, support businesses and accountants across the UK.
Latest News
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5 December 2023Capital Allowances Manual
Capital allowances play a significant role in taxation. Allowing businesses to claim deductions for the depreciation of their assets. Among these assets, plant and machinery are frequently mentioned. However, the term “plant and machinery” is not explicitly defined in tax law. It should also... -
22 November 2023
Autumn Budget 2023: Changes to Capital Allowances
The Autumn Budget of 2023 has arrived, and with it comes significant changes and developments the government has put in place. Chancellor Jeremy Hunt delivered the statement on Wednesday, 22 November 2023. For businesses and individuals alike, these adjustments in tax policies can have far-reaching implications.
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Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.