Category Archives: Purchase Annuity

Capital allowance is the deduction available to UK tax payers while computing taxable income. In UK, depreciation is not an allowable expense and its place is taken by capital allowance. Both depreciation and capital allowance become applicable when you buy long-term assets for business purposes. Buildings, plant & machinery and furniture are examples of such long-term assets. As these assets will be used over a number of years, you cannot write their costs off as expense in the year of [...]

Capital allowances are the amounts allowed to be written off as expenses when you incur long-term capital expenditure. You cannot write off the entire cost of long-term assets (that will be used over a number of years) as an expense in the year the expenditure was incurred. The general idea behind capital allowances is that the cost should be expensed over the period the asset is used. The Capital Allowances Act 2001 is the current legislation for capital allowances. This [...]

In other articles we have seen that when a disposal event occurs, taxpayers are subjected to a balancing charge or allowed a balancing allowance. A balancing charge involves charging back excessive capital allowances claimed and balancing allowance provides relief for claims that are short. Capital allowances are considered excessive when the disposal value is more than the notional written down value after deducting the writing down allowances from the original cost. If the disposal value is less than the notional [...]

Most of us would like to save on the taxes that we pay to the government. Businesses pay taxes on their business profits. By reducing the amount of profit that is taxable, we can save on taxes. You cannot show reduced profits by resorting to creative accounting because creativity is not appreciated in this field, particularly by investors and tax authorities. The only way you can reduce profits is by including all the expenses that tax authorities allow you to [...]

The Government announced that it would be clamping down on the ‘aggressive’ tax avoidance schemes being used by some large firms, who rent machinery and then claim excess tax relief. Businesses are able to claim capital allowances when they enter into a long funding lease for their buildings and machinery. However, some firms are attempting to claim back twice their entitled tax relief by entering into, “contrived, circular transactions involving the sale, leaseback and reacquisition of their plant and machinery” [...]

The Finance and Leasing Association (FLA) is calling on the Treasury to extend tax relief on energy efficient equipment to the asset finance sector. The association believes that the extension would benefit small businesses and is calling specifically for the relaxation of the Enhanced Capital Allowances (ECAs) to cover energy saving equipment hire. ECAs enable a business to claim up to 100 per cent first-year capital allowances on their spending on qualifying plant and machinery. Currently the ECAs apply to [...]

Every time a commercial property owner spends money buying or improving it, there is a strong chance they can offset that expenditure against profits or general income for tax purposes – a little tapped resource offered by the Inland Revenue. Indeed, the ability to claim capital allowances on commercial properties has been available to property owners since 1878. Most people believe that their accountant have already claimed everything, yet HMRC estimates a massive 96% of those eligible for a refund [...]

Up to late 19th century (1878 to be precise) there were no capital allowances. In 1878, a “wear and tear” allowance was introduced for traders in plant and machinery by allowing them to reduce their income by the allowance amount. For mills and factories, a “mills and factories” allowance was available. The quantum of the allowance was an amount considered “just and reasonable” and tended to represent the “economic” depreciation in the value of the equipment. A new system of [...]