The Government has announced a number of changes to the capital allowances available to individuals and companies which will take effect from April 2012. Capital allowances provide tax relief to individuals and companies who incur expenditure on qualifying plant and machinery for use in their businesses.
What are the changes?
A Reduction in the Main and Annual Investment Allowance available.
Currently individuals and companies are entitled to the following allowances:
| Type of Allowance | Relief Available | Reduced Allowance From April 2012 |
| Annual Investment Allowance (AIA) | 100% of up to £100k of qualifying expenditure | 100% of up to £25k of qualifying expenditure |
| Writing down Allowance (WDA) | 20% | 18% |
| Integral Features Allowance (IFA) | 10% | 8% |
| Energy Saving Plant and Machinery | 100% of expenditure | No change |
This table is not intended to be an exhaustive list of all the capital allowances available to individuals and companies.
As the table above shows, the largest change coming into force from April will be the reduction of £75,000 in the AIA. This will impact any company who has is expecting to invest more than £25,000 on plant, machinery or equipment in any year. For example, a company with a March year end, subject to highest rates of corporation tax, spending the full £100,000 on qualifying expenditure, will find the tax relief fall from £26,000 to just over £9,600 in the first year of expenditure. It should be noted that full relief for capital spend is still given over time, but because of the lower initial relief and lower rate of annual writing down allowance, the time frame over which businesses will enjoy the relief will now be extended over a much longer period.
What can be done?
As with all tax saving opportunities there are various pitfalls to be wary of and if your company year end does not coincide with the 31 March, the limits are pro-rated which can reduce the relief even further. If you are thinking of investing in new plant and machinery, and are able to bring forward the investment into March, or were intending to invest this month, please call us to discuss your situation.
Please note, that if you have invested in commercial premises in the past and have not taken any tax relief yet for the integral fixtures and fittings included within the building itself , you may be missing out on a further tax savings opportunity, to find out more read our Commercial Building – Last chance saloon article.
Other Announcements of Interest
Feed-in tariffs (FIT) and Renewable Heat Incentives (RHI)
Enhanced Capital Allowances will be denied where tariffs are actually paid in respect of electricity or heat generated under the FIT and the RHI schemes.
Business Premises Renovation Allowances (BPRA)
This is a 100% allowance available for renovating and converting empty commercial properties in certain disadvantaged areas. A list of relevant disadvantaged areas is available and does include some areas within the South East and London. BPRA is extended by 5 years to 31 March 2017 for companies (5 April 2017 for non corporates). Where a property which has qualified for BPRA is sold and a balancing charge arises, the new owner is able to claim plant and machinery allowances on the residue of these fixtures.
If you would like to discuss the opportunities available to maximise the capital allowance you are entitled to please call our Corporate Tax Team on 01727 838 255.
Great news for employees who are given smartphones by their employers, as HM Revenue & Customs have announced that they are no longer liable for tax and national insurance contributions for business or personal use.
HM Revenue and Customs had previously only accepted that this exemption applied when phones were used exclusively for business, or for older-style mobiles which acted solely as phones, however the new guidance will mean that the exemption is now applicable to all smartphones (including iPhones, Androids and similar) even if there is no business use at all. In some cases it may even be possible to claim back the tax and NIC paid to date.
The exemption only applies for devices specifically designed for voice communication via a telephone network meaning that phones designed only for use with Skype or similar, or tablet computers such as iPads, will still be taxable if there is any private use.
Peter Davies, Senior Tax Manager at WMT, commented that “this is a welcome recognition by HMRC of changes in technology which mean that the majority of new phones now provided to employees are smartphones, and that they should be taxed in a similar fashion to older-style mobiles. It was becoming more and more untenable to suggest that an iPhone was actually not really a phone at all but a portable computer.”
For advice about the impact of the new rules, and what to do if you have previously paid tax or National Insurance in respect of a smartphone, please contact Peter Davies on 01727 838255 or at info@wmtllp.com.
As we all know, traditional bank funding for businesses in the UK market is difficult to find these days. Banks will still lend to good companies that can meet the banks’ criteria and demonstrate that their business is strong and they can service the debt. The trick to securing the funding is to be fully and carefully prepared before making an approach to any bank.
Here are our tips to help you achieve success:
- The presentations you prepare for the bank need to be succinct, accurate and positive and clearly set out the level of funding required for what specific purposes. Forecasts need to include an integrated profit and loss, balance sheet and cash flow;
- Ensure that you know exactly how and where the business is making profits;
- Demonstrate that you have your costs and overheads tightly under control;
- Show that margins and cash flow are sustainable; and
- Address any customers or products that are underperforming in terms of margins or cash flows.
If you would like to discuss any aspect of the fundraising process, please contact Andrew Williamson on 01727 838 255.
As reported in The Times it has been announced that HM Revenue and Customs (HMRC) have come up with an innovative way of encouraging the early submission of tax returns, by the introduction of an incentive. The scheme led by David Cameron gives workers the chance of winning £100,000 if they file their tax return by the end of November, as opposed to 31 January.
This initiative which could start as early as this year is set to save HMRC tens of millions of pounds which would usually be spent chasing people who pay their tax bill late. It could also save taxpayers millions, with an estimated £368 million in penalties being paid on self-assessment forms filled out late or incorrectly.
The tax return deadline for 2010/2011 is still 31 January 2012, hefty penalties are in place for late submission. To find out more about our tax return service and how we can help you please contact our Senior Private Client Tax Manager Paula Jeffs on 01727 838 255.
With 2012 now upon us, we urge all businesses to make sure that they are aware of and compliant with all the rules and regulations imposed by HM Revenue and Customs (HMRC).
HMRC are stepping up their compliance activity for 2012 and have their sights on certain sectors, these include:
- electricians and electrical fitters
- commercial traders on e-marketplaces
- construction
- scrap metal dealers
- fast food outlets
- landlords owning three or more rental properties
- individuals who own properties overseas which are rented out
- offshore issues
If your business is in any of the above sectors or if you have offshore dealings and you believe your tax affairs may not be completely correct or up to date it will be vital to act quickly as HMRC have been actively using their legal powers recently to gain information in these areas. In some cases there may be ‘disclosure opportunities’ available giving you a window of opportunity to make disclosures, so we urge you to act now.
Sectors that have been under scrutiny in the past have included plumbers and tutors, the plumbers campaign alone has generated over £2m for HMRC, and to date HMRC have arrested nine plumbers from whom disclosures were expected but not forthcoming and started almost 1,000 other enquiries.
An investigation by HMRC is a stressful and difficult experience. Tax can generally be recovered for up to 20 years together with interest. Penalties usually start from at least 30% (unless due to nothing more than carelessness) and can reach 100% of the tax due – or as much as 200% if relating to undisclosed overseas bank accounts. This year, for the first time, HMRC now has the power to publicly “name and shame” those found to have deliberately evaded or understated their taxes and to place defaulters under an intensive monitoring programme for up to five years.
For more details about the above, please read our full 2012 set to be a prosperous year for HM Revenue and Customs, don’t let this be at your expense article.
If you are affected by any of these issues specialist advice is essential and action should be taken before any direct contact from HMRC. For a confidential discussion please call Peter Davies on 01727 838255.
The statutory residence test (SRT), designed to help the government to determine residency of an individual and consequently their UK tax liability has now been postponed.
It had originally been proposed that the SRT would take effect in April 2012, however, this has now been postponed due to issues raised in the consultation and the legislation will be included in the Finance Bill 2013. It is proposed that the rules will take effect as of April 2013.
For further information about the proposed SRT please view the full the full UK Residence – new statutory test proposed from April 2012 article.
With Christmas just around the corner and the New Year fast approaching we would like to draw your attention to some key business and tax points that need consideration for 2012. We are optimistic that 2012 can be a financially prosperous year and hope that the following helps you along the way to achieving success in 2012.
We would like to congratulate Paula Jeffs, senior private client tax manager at WMT a leading accountancy and tax firm in St Albans, on passing her recent exams, making her a member of the Society of Trust and Estate Practitioners.
Paula’s recent qualification was obtained due to her significant practical experience and knowledge of this area, she is now one of the few tax advisors in Hertfordshire with this qualification. Paula Jeffs comments: “we are finding that we are getting more and more enquiries from people looking to plan for the future, many do not know what is available to them and the tax savings they could potentially make, being STEP qualified enables me to offer the best possible advice.”
If you would like further information about trusts and Inheritance Tax Planning, please call Paula Jeffs on 01727 838 255.
Whilst there may not have been many headline grabbing announcements in yesterday’s Autumn Statement, there are still enough points worthy of note for both individuals and businesses to consider.
Whilst the announcements do not predict a recession, there has been a revision in short term growth prospects for the UK economy which have dominated the headlines. This may cause many businesses to still feel rightly cautious about the outlook for their sector. However for some sectors the announcements of public spending plans will bring opportunities.
Some other announcements may encourage confidence in attempting new investment as enterprise is trying to be encouraged. There are incentives for investment in new businesses and attempts to make some areas such as employment law simpler for the small business.
The summary that follows not only covers some of the key announcements from yesterday, but also provides a reminder of other key developments which are to take place from April 2012.
Unfortunately draft legislation will not be published until 6 December 2011. The devil is always in the detail - and we will need to await that detail. We will provide an update for you if significant changes are announced on 6 December.
Please click on the following link to view our Autumn Statement 2011 commentary.
Following the Autumn Statement this afternoon, Anne-Maree Dunn, Tax Partner at WMT comments:
The Autumn Statement is one of the two formal statements that HM Treasury make to Parliament in the year – the other being the Budget. The Autumn Statement is utilised by our coalition government to outline economic growth and government finance projections.
The UK economy is currently faced with higher than expected inflation, slower than expected growth and several crises across the Eurozone. All of this uncertainty is leading UK households and businesses to be cautious in their spending, investment, borrowing and recruitment.
George Osborne spoke for about an hour this afternoon on plans to curb spending, keep interest rates low, assist the flow of credit to small businesses and accelerate enterprise in the economy. Much of the detail of the measures will not be published until 6 December. Not a lot to get excited about at present until we see more of the detail behind these measures.
The main points highlighted include:
- A new Seed Enterprise Investment Scheme (SEIS) that will give investors in start up businesses 50% tax relief; along with a capital gains tax exemption for assets disposed of in 2012/13 and invested in the SEIS in the same year
- State pension age set to increase from 66 to 67
- The planned 3p fuel rise in January is to be scrapped, a 3p rise is planned for August 2012
- A credit easing programme from small and medium sized businesses to underwrite up to £40bn in low interest loans will be introduced
- Finance partnership of up to £1bn to help secure funding for medium-sized firms will be available
- An extra £1bn in funding for regional growth regeneration fund
- A new build indemnity scheme for builders and lenders to the stimulate the construction of new homes
- Support package for energy-intensive firms
- Commitment to improve the energy efficiency of buildings
- Proposals for radical reform of UK employment law, including simpler, quicker and clearer dismissal processes
- 100 per cent capital allowances in Sheffield, the Black Country, Liverpool, Tees Valley, North Eastern and Humber Enterprise Zones.
As always our Team are here to answer any query you may have, to speak to a member of our Team call us on 01727 838 255.
