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Capital spends - Tax planning for growing businesses

It is important to review capital spend to see what capital allowances are available:

  • 100% on green technology – see http://www.eca.gov.uk/ (if you are selling rather than buying should your product be registered?)
  • 50% or 40% first year allowances for certain businesses on plant and machinery
  • 25% on plant, fixtures, cars, etc (cars capped at £3,000 p.a.)
  • 6% on plant with a life in excess of 25 years
  • 4% on industrial buildings

 

You will appreciate that it is important properly to review the nature of the spend to maximise tax relief.

If plant is to be leased, the key areas to consider are whether the leases will be:

  • Finance leases where the lessee takes on the risks and rewards of ownership that provide for tax relief on interest costs and depreciation

 

  • Certain new leases may transfer capital allowances to the lessor – see separate note on long funding leases

 

  • Other operating leases – tax relief on lease costs (capped for cars with a value in excess of £12,000)

 

 

Date: 30th March, 2007
Author: Cathy Corns

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