Capital Allowances – Better than they’ve ever been
Following last week’s budget we now know there are no more surprises in store for the capital allowances rules, and have a clear picture of the reliefs available going forward.
Capital Allowances now more valuable than at any point in the last decade
The Super Deduction, as expected, will end when the new tax rate goes up, but this doesn’t mean a reduction in relief for capital allowances. At its best, the super deduction could offer 24.7p on the £1 saving for main pool plant & machinery expenditure. From April 2023 onwards, the Annual Investment Allowances will attract relief of 25p on £1, for all plant & machinery expenditure up to £1m spend. With the AIA limit now remaining at £1m permanently, there is huge relief to be obtained through capital allowances for business’s buying and developing commercial property.
And its not just companies that will need the more valuable capital allowances reliefs. The changes to income tax will see sole traders and partnerships paying even more tax. Relief generated through capital allowances can offer savings of up to 45p on the £1 for those paying the additional rate.
Research & Development Allowances are still an underclaimed opportunity
While the R&D Tax Credit offering saw some changes, the capital allowances version: Research & Development Allowances (RDAs) was unchanged. It offers 100% first year allowances for expenditure incurred on facilities & equipment used for R&D. This is the same level of relief as AIA, however RDAs have 2 major advantages:
- RDAs are not capped to £1m
- RDAs are not limited to plant & machinery
That’s right, RDAs are available on structural spend, that otherwise only offers deductions of 3% per annum. This can represent a massive uplift. Business’s purchasing or improving premises where R&D will be carried out can benefit from some significant reliefs.
Investment Zones still on the way
The Autumn Statement didn’t finalise anything about the Investment Zones announced in the mini-budget, but didn’t scrap them either. The government is “refocusing” where the zones will be, so watch the space to see where you can obtains unlimited first year allowances and accelerated relief for structural spend (3% increased to 20% per annum).
If you wish to discuss how these changes may impact your claims, we would be delighted to hear from you.
0114 553 7850
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