Businesses cautioned on missing post-Budget tax planning opportunities
Businesses will need to plan their investments carefully when the annual investment allowance (AIA) rises on January 1, 2019.
Tax advisors of national audit, tax, advisory and risk firm, Crowe, are warning that, as the allowance will rise from £200,000 to £1m for two years, businesses will need to take additional care with their tax planning.
Rebecca Durrant, corporate tax partner based in Crowe’s Manchester office, said the Chancellor’s decision to increase the AIA would apply to all businesses, but would be a particular boost for small and medium sized enterprises (SMEs).
“Philip Hammond’s changes to the AIA provide a much-valued boost to businesses of all sizes, as they can obtain tax relief on plant or machinery in year one up to £1m, which is effectively accelerating the time of tax relief.”
However, the changes were not as simple to implement as they would appear at first sight, she added.
Companies without a December 31, year end will have to carefully time when they buy new plant or machinery to maximise the benefit.
“Tax in a business needs to be seen as part of the bigger picture,” she said.
“It needs to be integrated into the business plan and all implications must be understood before initiating individual applications for tax relief in isolation.”
For example, while announcing the AIA increases for two years in the 2018 Autumn Budget, the Chancellor also revealed that allowances on some items of plant and machinery with a longer life will be reduced from 8% to 6%, and 100% allowances for energy saving and environmentally-beneficial technology will be abolished.
However, first year allowances will be available until March 2021, for electric charging points.
There has also been a Structures and Building Allowance introduced, which is a 2% per year allowance on construction expenditure of non-residential structures and buildings. This came into effect from October 29, 2018.
Rebecca Durrant said: “Overall, this is a package of measures that can be welcomed by businesses of all sizes, particularly for SMEs, but it is important to see these changes as a collective, and not just examine and implement them in isolation.”
