Smaller businesses can make tax savings in
2008 when new tax breaks come into force for
assets such as plant and machinery;
according to accountants and business
advisers DTE.
From April 2008, spending on capital items
will qualify for a 100 per cent tax break,
up to an annual limit of £50,000. This will
create opportunities for smaller businesses
to significantly reduce their tax bills by
deferring purchases until the next tax year
when this generous tax break becomes
available.
"The present system means 100 per cent
allowances are normally available only on
certain environmentally friendly equipment,"
explained David Teale, director of tax at
accountants and business advisers DTE.
"Otherwise, the current relief for plant and
machinery is usually either 40 per cent or
50 per cent in the first year, depending
upon the size of the business. So taking
advantage of the 100 per cent relief on
spending up to the £50,000 annual limit can
add significantly to your bottom line
performance - but only from 6 April."
David Teale believes many companies may not
be aware that the reform process is already
under way because the proposals are still in
the consultation stage. "However, an outline
of the government's thinking is available
and may be relevant now to investment
planning decisions," he said.
Further changes to the rules are expected
for so-called 'integral fixtures'. These are
items such as air conditioning, central
heating, and lifts, which are part of the
fabric of a building, but still qualify for
the plant and machinery allowances.
"The rate of allowance for integral fixtures
is to be reduced from the current 25 per
cent annual allowance down to 10 per cent.
Therefore, reviewing buildings now to see
whether a claim could be made for at least
one year at the higher rate may be worth
doing," commented David Teale.
"On the other hand, items such as cold water
supply and electrical wiring, that usually
do not qualify for a tax break at present,
may be included for the 10 per cent rate."
As with all tax issues, the rules can be
quite complex; and you should seek
specialist advice before making any
decisions.
For more information on taxation issues
visit our Accounting section.
