What qualifies as capital allowance for lower taxes.
Here are some tips to help you make the most of your capital allowance for a tax break.
06:27 09 December 2013
When it comes to assets, depreciation is not typically tax deductible, which is why capital allowances are available. It can be tricky to figure out what can be included with capital allowances. If there are things, which are not immediately relevant to the commercial activity on the premises, they cannot be included.
Here are just some of the types of assets, which may qualify depending on the type of business:
- Machinery and large tools
- Computer and related equipment
- Electrical equipment and goods
- Software as long as there are more than two years of useful life left
- Vehicles used for commercial purposes
- Various pieces of office equipment
- Furniture
- Commercial telephone systems
- Drapery, carpets
- Any commercial fire safety equipment
- Swimming pools
- Storage
- Display equipment
- Sanitary-related furnishings such as baths and sinks
- Security equipment
- Refrigeration equipment
If you are not exactly sure what category your property should be identified under, you should talk to a tax specialist to ensure that you are only claiming the capital allowance that you are supposed to. There are also a few other things to keep in mind when calculating what you can claim.
- Size is not an issue when making a claim, so do not forget about company transportation even if it is a jet, boat, or even a commercially-owned railroad.
- You can claim 20% of the previous year’s allowance each year. For example, if you were to claim £50,000 one year, the following year you would only claim £10,000. The third year, you would only be able to claim £2,000.
- Not all assets will allow the 20% rate. There are some assets, which would be under an 8% rate as of the April 2012 tax year. Previous years at the different rate would have been 10%.
Due to the complexities, it is best to seek professional guidance.