For a temporary period up to 31 December 2015, the Government is offering all businesses an annual investment allowance of £500,000 per annum, encouraging businesses to invest in qualifying plant and machinery.
What this means is that a business can purchase new equipment up to the value of £500,000 in accounting periods ending before 31 December 2015 and receive 100% tax relief by way of capital allowances. The alternative is a writing down allowance of 18% for plant and machinery.
Therefore if your accounting period ends on 31 December 2015 and in that year you purchase £70,000 of new computer and tech equipment you will receive £70,000 in tax relief in that year, so reducing your profits chargeable to tax. If you are not making any taxable profits then this relief will simply increase the taxable loss that the business will carry forward to be offset against taxable profits in future years. Alternatively, the allowance does not need to be claimed and it will be worth considering the circumstances and future plans of your business in deciding on the best approach to take.
Currently these allowances have only been confirmed to be available until 31 December 2015.
The new limit of £500,000 was introduced from 1 April 2014. If your accounting period straddles this date or 31 December 2015 when the allowance is expected to change then there will be restrictions on the amount you can claim.
There are special rules which require the allowance to be shared amongst entities including where a company is a member of a group or has certain associated businesses.
This article has been updated to reflect changes in the Budget statement 2014.