But what wasn't clear was how these new Writing Down Allowances
would be applied.
If the AIA is abolished and replaced by a reduction in the tax rate to say 20% with a 20% writing down allowance
given on qualifying capital expenditure, the tax relief on pounds 50,000 of expenditure would then only be worth pounds 2,000, resulting in a potential loss of tax of pounds 8,500.
Capital allowances - also known as writing down allowances
- will decrease from 20% to 18%, while the special capital allowance rate will be cut from 10% to 8%.
In addition to the usual considerations - such as the funding of the purchase, the structure that is best to hold the assets and the timing - there is also an additional factor: the availability of capital allowances which change significantly in April 2012: Writing down allowances
are due to fall from 20% to 18% Long life assets writing down allowances
will reduce from 10%**The Annual Investment Allowance (AIA) - which previously gave relief for 100% of the first pounds 100,000 of expenditure - will fall to pounds 25,000 per annum.
Plant and machinery in the main pool will attract reduced writing down allowances
at a rate of 18% instead of 20%.
This qualifies it for the full first year writing down allowances
The rate of writing down allowances
now being based on the CO2 emissions of the car.
So, cars with CO2 emissions of up to 160g/km will be eligible for annual writing down allowances
of 20 per cent of the cost but those above that will only get ten per cent.
Writing down allowances
are calculated at 20 per cent per year but are restricted to an annual cap of pounds 3,000.