My client company is currently incurring large amounts of capital expenditure including significant amounts of plant and machinery. The reduction in the Annual Investment Allowance on 1 January 2016 was a huge disappointment to my client. Can anything be done to counter the reduction in available capital allowances?
The client might wish to consider whether any of the expenditure qualifies for the 100% “enhanced capital allowances” which can be claimed for certain expenditure on energy-saving and environmentally beneficial plant and machinery. Details of qualifying expenditure can be found at www.gov.uk/guidance/energy-technology-list and at www.gov.uk/government/publications/water-efficient-enhanced-capital-allowances.
Loss-making companies have the possibility of surrendering some or all of the ECAs for a 19% tax credit but any repayment cannot exceed £250,000 and may be restricted by reference to the company’s PAYE and NIC liabilities.
Whether or not expenditure already incurred qualifies for ECAs is a question of fact but there may be time to revisit proposed expenditure to determine whether there is an overall benefit to be gained by substituting qualifying for non-qualifying.