Budget 2009 - Temporary first year allowances for plant and machinery
The Budget has seen the temporary re-introduction of first year allowances (FYAs) for purchases of qualifying plant and machinery. Allowances of 40% will be available to companies, partnerships and individuals carrying on qualifying activities (which includes trades and ‘normal’ property businesses) in excess of the annual investment allowance (see below) subject to the following:
- the expenditure must be incurred in the year to 31 March 2010 (for companies) and 5 April 2010 (partnerships and individuals).
- must not relate to specific proscribed assets, including for example, long life assets, cars and assets for leasing.
Unusually, there appears to be no restriction on the amount of the expenditure or the size of business incurring the costs.
The annual investment allowance (AIA), introduced last year, allows businesses (or groups, where related businesses carry on similar activities) to claim a 100% deduction from taxable profits for £50,000 of expenditure on eligible plant and machinery.
Confusingly, the definition of eligible plant and machinery for AIA purposes differs quite significantly from that for qualifying plant and machinery for FYAs.
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David Mansell is a Corporate Tax Partner at Mercer & Hole.
Date: 22nd April, 2009
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