How The Capital Allowances Shake-Up Will Affect Your Business

27/02/2012

By Anne Eager, Tax Partner, RJP Accountants

Tax planning is an important issue to bear in mind when small and medium sized enterprises (SMEs) are considering their business strategy to ensure that the business operates in the most tax efficient way.

This is why getting to grips with upcoming changes following the release at the beginning of December of draft legislation for Finance Bill 2012, is of the utmost importance.

Capital allowances

One of the measures in the Bill concerns claiming capital allowances for fixtures included within the acquisition of a property - something which was the subject of a consultation during 2011....

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Changes introduced in the Bill, which take effect on April 1 2012 for corporation tax purposes or April 6 2012 for income tax purposes, may impact any business disposing of, or acquiring, a property containing fixtures which qualify for capital allowances

Currently the rules effectively give a two year window to make a capital allowances claim in these circumstances, although there is flexibility to claim the capital allowances in any later year’s tax return as long as the asset it still owned in that later tax year.

The claim is calculated using a ‘just and reasonable’ apportionment of the purchase price of the asset.

In HMRC’s view there has been a significant increase in the number of people making these (substantially late) claims, encouraged by the prospect of the sizeable tax savings available.

HMRC have concluded that a sizeable number of these claims are incorrect with the result that capital allowances are wrongly being claimed twice — something which has the potential to the cost the Exchequer significant money. As HMRC lack the resources to be able to check all the claims being made, it is, instead, changing the rules (in its favour of course!)

New Rules

Capital allowances will be available to a... continued on page two >

 

 

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