Riverbank It management

I discovered last week that HM Government's recession-busting generosity extends to providing a tax break on IT equipment purchases. The scheme only runs for a year so it's important not to miss out.

My source was Cormac Marum of Harwood Hutton chartered accountants. Here is exactly what he told me...

Don’t miss out!
Temporary tax break on equipment purchases

Its rare to get a tax break from the Government and usually they don’t last very long.  Its important then not to miss out.

To help British business gear-up for the hoped for recovery, HM Revenue & Customs are offering a temporary tax incentive for businesses to acquire general plant & machinery, which includes most forms of IT equipment.

Under the capital allowances rules, each business or group has an Annual Investment Allowance (‘AIA’) enabling it to get a 100% tax deduction on the first £50k of qualifying expenditure including IT equipment. Expenditure in excess of this limit (or on items, like cars, which do not qualify) secures tax relief at only 20% or 10%.  Most forms of IT equipment qualify at 20% on such expenditure.

What’s new, however, is that now for a 12 month period (starting on 1 April 2009 for companies and 6 April 2009 for unincorporated businesses) there is a temporary 40% first year allowance.  This means that, when calculating your taxable profits, you get to write-off 40% of the cost of the equipment falling outside the AIA.

This doubling of the allowance will be welcome to all businesses buying IT equipment.  Don’t therefore miss out by delaying purchases until after the end of next March.  You’ll kick yourself if you do!

Tax rules are always complicated and the rules about when capital expenditure is incurred are no different.  You would think that the date expenditure was incurred for capital allowances purposes was the date you made payment but that would be far too simple for the taxman. 

You need to speak to your accountant and tax adviser to understand how the rules work but what is critical, broadly, is the date you unconditionally commit for payment.  Provided you are due to pay within 4 months of that earlier date, that earlier commitment date normally becomes the key date for tax purposes.  So expenditure you may intend to pay for as late as June next year may allow you to qualify for the temporary 40% allowance.  But you will need to speak to your adviser to ensure it qualifies.

Should you require any extra assistance on this opportunity, do get in touch.

Cormac Marum, Partner, Harwood Hutton.

tel 01494 739500