The new regime for capital allowances announced in the last Budget has now been passed into law and has created a planning window for businesses. Most of the changes do not commence until April 2008, but the time for considering their effects and acting accordingly is now.
The main issues are as follows:
- Investment Timing
The ‘first year allowance’ for items qualifying for capital allowances will be 100 per cent on the first £50,000 of qualifying expenditure from April 2008. If you are considering a capital investment of more than £50,000, it may be worth considering incurring part of the expenditure in the present tax year and deferring a balance of £50,000 until the tax year beginning in April 2008 (1 April 2008 for companies, 6 April 2008 for individuals).
- Industrial Buildings
The 2008/9 capital allowances regime is in general less ‘friendly’ than the current regime, and this is especially true for items of plant in buildings. Currently, ‘full’ capital allowances are available for these. From 2008, ‘background plant’ (as opposed to ‘trading plant’) will qualify for a much lower (10 per cent) rate of allowance. If you are considering property refurbishments, 2007/8 looks a good year in which to carry them out!
The new scheme for capital allowances on cars and changes to the taxation on benefits in kind will further erode the tax-efficiency of the company car.
The 2007 Finance Act will have a significant impact on businesses of all sizes. Think through the implications now.