Investing in equipment

Get a great new car like a Tesla Model S and save tax too!

Posted on September 25, 2014 by Investing in equipment 0

I have been salivating over the new Tesla Model S that has recently been introduced in the UK. It carries a fairly hefty price tag but given its space-age interior, high performance and ‘cheap as chips’ running costs (its 100% electric) its hard to ignore.

The good news for company owners is that there are some nice tax incentives that can sweeten a deal in getting your mits on one of these cars.

Ordinarily it rarely stacks up from a financial perspective to acquire a car through the company as the driver gets stung for high benefit in kind income tax charges and the company gets sloooooow tax relief in the company. 9 times out of 10 it makes more sense to acquire the company personally and take advantage of the Approved Mileage rates to claw back some of the running costs on business mileage. But there are a handful of exceptions – and this is one of them.

The Government wants to encourage people to invest in low Co2 emission and electric cars so they offer tax incentives. A Tesla Model S ticks all the boxes (for now…)

  1. As it is electric, you can get a 100% write-off against taxable profits in the company. This is huge. A £70k P85 Tesla Model S bought through the company (either outright or via HP) would save corporation tax of c£14k!
  2. There is 0% benefit in kind charge – watch out, this is scheduled to run out on 5 April 2015
  3. No road tax
  4. No London Congestion Charge

There have been tax incentives like this around for a while for low emission cars but, to be frank, these cars have been fairly uninspiring.

The Tesla Model S is a bit of a game-changer in this respect and hopefully opens the doors for more innovative performance cars that both help the environment whilst being functional and fun too (oh and tax friendly!).

Buy 10x more equipment and get 100% tax relief!

Posted on January 17, 2013 by Investing in equipment 0

Not overly helpful to the majority of fast growing UK companies but the annual investment allowance for expenditure on machinery, equipment, furniture etc went up from £25,000 to £250,000 with effect from 1 January 2013.

This means that you could purchase (in theory!) £250,000 of laptops, tablets, desks, chairs etc in a financial year and receive a 100% tax deduction against your taxable profits.

So just imagine, you could splash out on:

and receive £250,000 tax relief!

Not very likely – but still, nice to know….

Watch out for financial accounting periods that straddle the 1 Jan 2013 introduction date as you’ll need to calculate how much qualifying spend is eligible under the ‘old’ £25,000 limit to 31 Dec 2012 and how much falls within the new much higher limit from 1 Jan 2013.

As ever, timing is everything!

(And no, cars do not qualify for relief under this Annual Investment Allowance (AIA) )

 

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Getting maximum tax relief on new equipment purchased for your business

Posted on August 16, 2010 by Investing in equipment 0

When considering purchasing that shiny new MacBook, desk, printer etc (or pretty much any other capital item) for use in your business, you should think about how you can get the best tax result (as well as considering the best model and price).

Purchased computer equipment, furniture and other plant & equipment is not simply deducted from your profits for accounts and tax purposes. Such items are treated as ‘fixed assets’ in your business accounts and depreciated over their useful economic lives e.g. a £600 laptop might be written off against your business profits over say 3 years (at £200 per year). But tax doesn’t necessarily follow this treatment – that would be far too straightforward!

The Capital Allowances tax regime governs the UK tax treatment of fixed assets in order to provide a degree of uniformity given that depreciation policies can differ between different companies.

The good news is that the capital allowances regime has been significantly simplified over the past few years for the majority of UK businesses. Since 2008, the Annual Investment Allowance (AIA) was introduced which allows businesses (except LLPs) to deduct expenditure up to a certain amount each year from taxable profits in Year one ie 100% tax write off immediately against profits.

The AIA originally started at £50,000 per annum, then went up to £100,000 with effect from 1 April 2010 for companies (5 April 2010 for unincorporated businesses) although it has recently been announced that this will decrease to £25,000 from April 2012.

A key tax planning point therefore is to accelerate planned future significant capital expenditure before the capital allowance rates decrease in 2012.

Care needs to be taken in applying these limits in periods where the limit has changed e.g. a business with a 31 December 2010 year end would need to pro-rata the AIA limit given that the allowance changed from £50,000 to £100,000 with effect from 1 April 2010 for companies.  The entitlement is broadly £87,500 AIA for a 31 December 2010 year end, however, some nifty legislative drafting ensures that companies that may have already invested the full £50,000 before the 1 April 2010 (as it otherwise would have been permissible pre the Budget announcement) are not unfairly penalised.

Note that cars are not eligible for the AIA – although there is a some simple tax planning available to fund car purchases with significant tax relief, but I’ll leave that for a future post…

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As always the above information is for guidance and educational purposes only and does not constitute professional advice. Please seek professional advice specific to your facts and circumstances (as tax law can be pretty complex and changes fairly frequently!).

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