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CATEGORY - CORPORATION TAX

CAPITAL ALLOWANCES

Companies are able to claim capital allowances against the costs of fixed assets in the same way that self-employed persons can. The rules are broadly the same so to avoid repetition please refer to our series of information sheets on Capital Allowances under Self-Employment.

The main point to note about companies is that it is still necessary to calculate capital allowances according to the tax year even though you are claiming them for the company's financial year. For example, if your accounting period is for the year ended 31st December 2008, you would need to work out which assets were purchased up to 31st March 2008 and which were purchased later. You can only claim First Year Allowances at 50% on the earlier purchases but the later purchases could be claimed at 100% to the extent that they are covered by your Annual Investment Allowance (AIA). Remember that the AIA must be scaled back from £50,000 to £37,671 for the 2008 calendar year as your accounting period only covers 275 days since the AIA was introduced. You would also have to work out hybrid Written Down Allowances for that calendar year on the brought forward value of your general plant and machinery pool, plus any separate pools for cars costing £12,000 or more.

The only difference in the rules for companies compared to sole traders arising out of the new capital allowances regime is that balancing allowances cannot be claimed on the disposal of cars purchased since 1st April 2009 with CO2 emissions above 110 g/km. These cars must go into either the general or special rate pools (depending on whether CO2 emissions are above 160 g/km) and you can only claim written down allowances on the pool balances brought forward from the year before. This means it would take 14 years to claim full tax relief on a car costing £20,000 with CO2 emissions up to 160 g/km and 30 years if CO2 emissions are higher than this, and it would take even longer if there are other assets in the pool causing the balance to exceed £1,000. Fortunately this new rule does not yet apply to cars purchased prior to 1st April 2009 as companies will have up to 5 years to claim balancing allowances on these vehicles, and sole traders will continue to enjoy the luxury of claiming balancing allowances on all motor vehicles as they must go into separate pools due to the private use adjustments.


Acumen Tax Solutions
2 Purley Bury Avenue, Purley Oaks, Surrey CR8 1JB
Tel: 020 8406 9425 Mobile: 07813 582890 E-mail: info@acumentaxsolutions.co.uk

For information of users: Although every care has been taken in compiling this material, it only provides an overview and does not take the place of an individual consultation. We strongly advise all users to consult the detailed legislation or seek professional advice. Therefore no reponsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or this firm.

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