There were some important changes to capital allowances announced in the Summer Budget giving scope for planning capital expenditure to ensure tax liabilities are kept a minimum.

Plant and Machinery

At present expenditure on most items of plant and machinery (not cars) benefits from the Annual Investment Allowance (AIA). This means that qualifying expenditure attracts 100% tax relief up to a particular threshold.

In the April Budget Alistair Darling increased this threshold from £50,000 to £100,000. However, in the Summer Budget, George Osborne announced that the figure was reducing to £25,000 with effect from 6 April 2012.

The AIA over the next few years is therefore summarised as follows:-

2010/11 100,000
2011/12 100,000
2012/13 25,000

Clearly there is a large reduction in the existing allowance and for those with significant amounts of capital expenditure this may have a large impact on tax liabilities.

There are some complicated rules around apportionments of the AIA depending on your accounting year end, so take advice before making firm plans.

Cars

Changes which took effect from this April have increased the tax burden on company cars. This is particularly the case for expensive and high emitting cars and the position worsens from April 2012.

If a company car is the preferred route, leasing of vehicles is now very much more attractive because of the increased reliefs available.

James is available to offer a wide range of business advice. For a free no obligation consultation contact James on 0845 0774163 or at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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