The Annual Investment Allowance 2014 has been increased to £500,000 p.a. for a temporary period to 31st December 2015.
The start period for this increase is 1st April 2014 for businesses and 6th April 2014 for sole traders / partnerships.
From 1st January 2016 it is then expected to reduce back down to £25,000 p.a.
What Does this mean for your business?
This means that with effect from April 2014 you can spend up to £500,000 on plant, machinery and equipment and offset 100% of the expenditure against your profits.
Any Company delaying or thinking of investing in new plant, equipment, computers, vans, lorries, shop equipment etc. should look at the possibility of doing this whilst this new allowance is in place.
Although cash flow can hinder your Company to take advantage of this new Annual Investment Allowance 2014 rate there is another way of taking advantage of this opportunity.
A Company or individual could purchase their equipment through hire purchase or a loan with the bank or other organisation. This is treated as an outright purchase and the assets are immediately owned by the Company/Individual
e.g. A Company invests £50,000 in new plant for their warehouse and takes out a hire purchase agreement with a finance company. The Company will make repayments to the finance company over say 5 years spreading the cost. The Company can then offset in that tax year the full 100% cost of £50,000 against their profits for that year.
There are some elements of expenditure that do not qualify under the Annual Investment Allowance 2014 and these are Land, Buildings, Cars, existing plant and machinery.
If you would like to discuss this more with us please feel free to call us on: 01492 533 695