Take the stress out of tax

Tax year-end is fast approaching and understanding capital allowances will make a difference to your profits. Read our quick overview to see what your business can claim.

It’s the time of year when most small business owners are totting up their tax bill.  Being clued-up about capital allowances pays off.  Capital allowances could entitle your business to cash-back credits on certain purchases and investments, reducing the need to approach lenders and shareholders for funds. There are three areas covered by capital allowances:

Plant and machinery
This includes:

• The cost of vans and cars, machines, scaffolding, ladders, tools, equipment, furniture, computers and similar items you use in your business.
• Expenditure on plant and machinery.

Look back on this year’s purchases and ensure you’ve claimed the capital allowances you are entitled to.  Sometimes you can claim for items used privately before they became part of your business such as a home computer or car.  For cars costing over £12,000, you can claim a maximum of £3,000 a year per car but, if you use vehicles with low CO2 emissions, there are no restrictions on allowances.  Remember, you can only claim a proportion of the allowance if a car, or any other piece of equipment or machinery is used for purposes other than business.

Buildings
You can claim for the cost of:

• Renovating or converting space above shops and other commercial premises to provide flats for rent.
• Converting or renovating unused business premises in a disadvantaged area.
• Allowances do not cover the cost of houses, showrooms, offices, shops, land, furnishing or extensions (unless providing access to a qualifying flat).

Research and development
An activity counts as research and development if:

• It involves innovation and creativity in science and technology.
• The research is relevant to your business.
• You are classed as a trader and not working in a profession or vocation.
• You can claim up to 175% tax relief on costs incurred by research and development, including the salaries and
• National Insurance payments for members of staff involved purely in research activity.

Even if your business is posting a loss this year you can surrender an Energy Saving technology allowance for a tax credit at 19%.

If you need any help making a claim, contact your tax adviser or call the HM Revenue and Customs self assessment helpline on 0845 9000 444.

Business Link’s start-up manager Roger Wilkins says; ‘Don’t lose your allowances for this year. Make sure you take advantage of the opportunity to reduce your tax liability and boost your cashflow at the same time.’

Further information:

Read our guide on capital allowance

Use our interactive tool on how you can help reduce your tax bill

Read about capital investment schemes at HM Revenue and Customs (HMRC) website