Capital Allowances Are So Important - Have You Claimed All the Allowances You Are Entitled To?
The latest change following on from the reduction in the annual allowance to 20% is to reduce the Annual Investment Allowance (AIA) from April 2012 to £25,000 from the current £100,000.
That is a significant reduction and small businesses should be aware of the stealth tax and plan accordingly These allowances do not differentiate between particular trades and professions and with greater farm profits expected due to the increase in corn prices and the general world shortage of food, together with the green effect it is doubly important for farmers especially with their trade tools being so expensive.
The length of ladies skirts rise and fall with fashion and capital allowances are the taxation equivalent.
You can claim capital allowances on qualifying expenditure incurred in the chargeable period.
They are available in many circumstances and the most often met is for the purchase of plant and machinery for your business.
In the often quoted case of Yarmouth v France (19 QBD 647) plant was defined as including whatever apparatus is used by a businessman for carrying on his business, not his stock in trade which he buys or makes for resale, but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business.
Since 1887 the courts have made many attempts at arriving at a definition of plant and now CAA 2001 sections 21 to 23 attempt to define the borderline between plant and buildings and limit the expansion of the "plant" category.
Lord Cameron in the House of Lords judgment in the case CIR v Scottish and Newcastle Breweries Ltd.
(55 TC 252) said: "the question of what is properly to be regarded as plant can only be answered in the context of the particular industry concerned and possibly in the light also of the particular circumstances of the individual taxpayer's own trade".
A recent case involving the pub chain Wetherspoon has helped clarify the position.
It has come to mean that plant is any asset that plays a functional role in a business that is not machinery or part of the building.
So that could be a sink or a hand rail to help people with impaired mobility.
At last identification of plant is easier but relief is also given for the cost of altering a building to enable plant to be installed.
As the cost of such works is added to the cost of the asset and with capital allowances being claimed on the total cost there have been disputes with HMRC culminating in the Wetherspoon case which recently ended after five years.
For the cost to be allowable the building alteration must remain a separate structure within the building.
In the Wetherspoon case they were able to claim capital allowances on the cost of the bricks, mortar, tiles, and the labour in putting these together to form a toilet cubicle.
The toilet cubicle was easily identified separately from the building and in Wetherspoon it meant that they also were entitled to claim capital allowances for the cost of the raised flooring leading up to some machinery and the splash-back tiles surrounding the sinks etc.
Remember that the cost of the associated professional fees such as planning fees and the cost of the architect should be included in the claim; the Tribunal said that it was permissible to estimate the proportion of the total costs.
That is a significant reduction and small businesses should be aware of the stealth tax and plan accordingly These allowances do not differentiate between particular trades and professions and with greater farm profits expected due to the increase in corn prices and the general world shortage of food, together with the green effect it is doubly important for farmers especially with their trade tools being so expensive.
The length of ladies skirts rise and fall with fashion and capital allowances are the taxation equivalent.
You can claim capital allowances on qualifying expenditure incurred in the chargeable period.
They are available in many circumstances and the most often met is for the purchase of plant and machinery for your business.
In the often quoted case of Yarmouth v France (19 QBD 647) plant was defined as including whatever apparatus is used by a businessman for carrying on his business, not his stock in trade which he buys or makes for resale, but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business.
Since 1887 the courts have made many attempts at arriving at a definition of plant and now CAA 2001 sections 21 to 23 attempt to define the borderline between plant and buildings and limit the expansion of the "plant" category.
Lord Cameron in the House of Lords judgment in the case CIR v Scottish and Newcastle Breweries Ltd.
(55 TC 252) said: "the question of what is properly to be regarded as plant can only be answered in the context of the particular industry concerned and possibly in the light also of the particular circumstances of the individual taxpayer's own trade".
A recent case involving the pub chain Wetherspoon has helped clarify the position.
It has come to mean that plant is any asset that plays a functional role in a business that is not machinery or part of the building.
So that could be a sink or a hand rail to help people with impaired mobility.
At last identification of plant is easier but relief is also given for the cost of altering a building to enable plant to be installed.
As the cost of such works is added to the cost of the asset and with capital allowances being claimed on the total cost there have been disputes with HMRC culminating in the Wetherspoon case which recently ended after five years.
For the cost to be allowable the building alteration must remain a separate structure within the building.
In the Wetherspoon case they were able to claim capital allowances on the cost of the bricks, mortar, tiles, and the labour in putting these together to form a toilet cubicle.
The toilet cubicle was easily identified separately from the building and in Wetherspoon it meant that they also were entitled to claim capital allowances for the cost of the raised flooring leading up to some machinery and the splash-back tiles surrounding the sinks etc.
Remember that the cost of the associated professional fees such as planning fees and the cost of the architect should be included in the claim; the Tribunal said that it was permissible to estimate the proportion of the total costs.