Fixed Assets - Making those claims...
When a business buys a
new fixed asset it is not normally possible for the whole
cost of the asset to be deducted from the taxable profits.
What
is a fixed asset?
In broad terms a fixed asset is any item that will
be used in the business and will have an expected life
of more than one year. This will include cars, computer
systems, vans and industrial machinery.
What can be
claimed?
The whole cost of the asset cannot be claimed in the
year of purchase. Revenue & Customs allow a portion
of the asset to be claimed each year that the asset
is owned by the business. This portion is known as
a 'capital allowance'. By granting a portion of the
cost, recognition is given to the fact that the asset
will last more than one accounting period.
The rates to be used depend on the nature of the asset:
- Most plant and machinery - 25% reducing balance
- Vans
- 25% reducing balance
- Most cars - 25% reducing balance but limited
to a maximum eligible cost of £12,000
Enhanced allowances
In some cases, enhanced allowances are permitted.
These are known as 'first-year allowances' (FYA) and
have recently been granted to small businesses on items
such as computers and IT equipment.
The rates of these
allowances have ranged from 40% to 100% depending
on when the item was bought. The enhanced rate is only
granted in the first year; thereafter, the rate drops
to 25%.
Environmentally-friendly assets
Enhanced allowances are also available for the purchase
of environmentally-friendly assets, such as approved
water-efficient toilets.
If you are about to purchase
an asset, Appletons Accountants will be pleased to
advise on the tax implications.
