Changes to Capital Allowances in January

Any business (unincorporated or company) thinking of making a large spend on plant and machinery in the next year should note this coming January’s reduction in capital allowances.

The headline “Annual Investment Allowance” allows a business to relieve up to £500,000 of spend against its profits in year one. But, from January 2016 this will be limited to £200,000 relief in year one. You will still get the same capital allowances over time, as whatever the headline rate is then anything not relieved in year 1 still gets a lower rate of relief (either 18% or 8%) each year over the life of the business.  Of course you’d rather ease your cash flow up front if possible, and to do so it may be worth thinking about bringing forward expenditure to 31 December or earlier to get earlier tax relief.  Businesses whose year end straddles 31 December will have a time apportioned limit across the two thresholds, but you’ll need to take advice from us about how the relief works in those cases.

There are rules to determine when the tax point is for capital allowances – usually this is the delivery date, but for example if payment is not due until more than four months after delivery, then it is the later payment date. For HP contracts it is usually when the asset is brought into use in the business. For milestone contracts it is generally when the stage certificate is issued.


For further information on this subject, please contact Rob Durrant-Walker

or – 01904 464 100