ANNUAL INVESTMENT ALLOWANCE

Annual Investment allowance can be claimed, up to a total of £500,000 on Plant and Machinery. This applies to sole traders, partnerships and limited companies until the 31^st of December 2015, as the rates will change in January.

You can claim Annual Investment allowance on Plant and Machinery including:

• Items that you keep to use in your business
• The cost of demolishing plant and machinery
• Parts of a building considered as integral features, for example: lifts, escalators, moving walkways, heating systems, electrical systems and external solar shading.
• Some fixtures such as fitted kitchens, bathroom suites, fire alarm and CCTV systems

You can claim if you rent or own the building, however only the person who bought the item can claim.  You can deduct the full value of an item that qualifies for Annual investment Allowance from your profits before tax. If you sell an item after claiming annual investment allowance you may need to pay tax.

Items you use outside your business

You can’t claim the full value of items you also use outside of your business if you’re a sole trader or partnership. You must reduce the capital allowance you claim by the amount you use the asset outside of your business. For example you buy a laptop for £500. You use it outside of your business for half of the time, therefore you would reduce the capital allowance by 50%.

Writing down Allowances

If you have spent more than £500,000 or want to lower your annual investment allowance if you have lower profits you can write down allowances. The main pool is 18%. The special rate pool of 8% can be used for parts of a building considered as integral, items with a long life, thermal insulation of buildings, cars with CO2 emissions more than 130g/km.

Working out Annual Investment Allowance

Begin with the closing balance of your main pool from the last accounting period. Add an items that you have bought or been given which qualifies for this pool- only include VAT if you are VAT registered. Takeaway anything sold or disposed of that originally qualified for annual investment allowance. Work out how much you can claim using the correct rate. Deduct the amount you can claim from the pool to get the closing balance. Also known as the tax written down value.

When to claim

You can only claim Annual investment allowance in the period you bought the item. The date you bought it is either when you signed the contract, if payment is due within less than 4 months  or when payment is due if it is due more than 4 months later.

If you buy something under a hire purchase contract you can claim for the payments you haven’t made yet when you start using the item. However you can’t claim on the interest payments.

How to claim

• Once you have calculated your capital allowance claim you can include this in either your
• Self-assessment tax return
• Partnership tax return
• Company tax return- you must include a separate capital allowances calculation

Employees can claim up to £2500 and can claim on their self-assessment tax return. If they aren’t required to fill in a tax return employees can fill in form P87.

You can find out more about Annual Investment Allowance at: https://www.gov.uk/capital-allowances/annual-investment-allowance.  If you need any help or advice please call us on 0113 2871430.