February 2008

CHANGES TO CAPITAL ALLOWANCES FROM APRIL 2008

Annual Investment Allowance

For small and medium sized businesses First Year Allowances will be replaced by an Annual Investment Allowance of £50,000. Expenditure up to this level will receive a 100% allowance. Any excess will then fall into the general pool and receive either the 20% annual rate or the new 10% rate for assets integral to a building. This annual allowance will only apply to plant and machinery and will not include cars.

Industrial Buildings

From 20 March 2007 no new IBA claims have been allowed. Existing claims i.e. 4% per annum will be scaled back by 1% over the next three years. So for the tax year 2008/09 the annual allowance will reduce to 3% and so on each year until 2010/2011, which will be the last year for any IBA claims.

Plant and Machinery

The rate of annual allowance for plant and machinery in the general pool of assets will be reduced from 25% to 20%. There is also a new category of assets defined as those assets that are integral to a building eg. lifts or air conditioning. These assets will attract a new rate of 10% rather than the existing 25% allowance. However for assets with a life greater than 25 years from 2008-09 the annual rate of allowance will increase from 6% to 10%.