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CATEGORY - SELF-EMPLOYMENT

CAPITAL ALLOWANCES

Capital allowances are tax breaks allowing you to claim certain amounts against your taxable profits. The rules usually change every year but a new regime was introduced in April 2008 so hopefully we should have some stability for a while.

What qualifies for a capital allowance? Well normally it has to be capital expenditure on assets which are used within the business in order to facilitate trading. This excludes stock and investments. It also excludes buildings or anything that forms an actual part of a building such as doors, windows, roofs, extensions, loft conversions and internal partitions (unless they are moveable). However, you can now claim for integral or installed assets such as cold water systems, electrical and lighting systems, heating and air conditioning systems, lifts, escalators, etc.

Sometimes it is necessary to decide whether expenditure is capital or revenue and the definitions are not necessarily the same as those that apply for accounting purposes. The distinction is not always obvious. It is generally better from a tax point of view for expenditure to be revenue as then you can normally claim 100% against tax as a trading expense in the same year that it is incurred. However, some revenue expenditure is not allowable as a trading expense, so if you cannot claim for capital allowances either then there is no tax deduction allowed for it at all.

Come and speak to us if you are unsure as to what qualifies for capital allowances. It is always worth negotiating with HM Revenue & Customs for things like refurbishment as they will usually agree a split between revenue and capital.

Please see the following Information Sheets for further details:

Annual Investment Allowance

Written Down Allowances

Enhanced Capital Allowances

Cars

Websites


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 responsibility 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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