Timing of Equipment Purchases

You are quite right- capital allowances (tax relief for equipment, vans, computers etc) are typically awarded in the year of purchase or the year the asset is brought into use.

You have a few options and they have very different consequences:

• Buy equipment in the poorer year and start using it – capital allowances awarded in poorer year
• Buy equipment in the poorer year and start using it – capital allowances awarded immediately, but you can opt to carry the expenditure over to the bumper year
• Buy equipment in the poorer year and do not use it until the bumper year – capital allowances awarded in the bumper year
• Buy equipment in the bumper year – capital allowances awarded in the bumper year

However, you should be aware that the maximum relief available on capital expenditure is dramatically reducing from £100,000 to just £25,000 from April 2012. Relief will still be available on expenditure above £25,000 but only at 18% per annum on a reducing balance basis; rather than the 100% you are expecting. Therefore, you must bear this in mind if you are planning to defer the expenditure and you are planning to spend over £25,000.

Your local TaxAssist Accountant would be happy to discuss this with you in more detail and calculate the estimated tax implications of the various options.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.