Tax breaks spell good news for small businesses
Businesses could save money with tax changes
Small businesses could soon be making considerable savings due to proposed changes to the tax relief system, for investment in assets such as plant and machinery.
From April 2008, spending on capital items will qualify for a 100% tax break, up to an annual limit of £50,000. This will allow small businesses to reduce their tax bills by deferring purchases until April 2008 when the tax break becomes available.
“The present system means 100% allowances are normally available only on certain environmentally friendly equipment,” said David Teale, director of tax at UK accountants and business advisers DTE.
“Otherwise, the current relief for plant and machinery is usually 50% for smaller businesses in the first year after purchase. So taking advantage of the 100% relief on spending up to the £50,000 annual limit can add significantly to your bottom line performance – but only from April 6 2008,” he added.
Teale believes that many companies may not be aware of the proposed reforms as the proposal is still in consultation, but advises businesses to obtain an outline of government thinking that is currently available.
Further changes expected are for ‘integral fixtures’, such as air conditioning, central heating and lifts. The rate of allowance for these is due to be reduced from 25% to 10%.
The rules for taking advantage of the tax break are complex, so small businesses are advised to seek specialist advice in order to review their strategic position.
© Crimson Business Ltd. 2008