capital allowances

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Capital Allowances

A reduction in a company's corporate tax in order to encourage it to make capital investments. In general, when a company buys capital assets or makes some other long term investment, its corporate taxes are reduced by some amount over and above what the depreciation on the asset would have been. This amount is called the capital allowance.

capital allowances

standard allowances, for TAXATION purposes, against expenditure on FIXED ASSETS by a firm in lieu of DEPRECIATION. In the UK currently (as at 2004/05) a 25% ‘writing-down allowance’ against tax is available for firms which invest in new plant and equipment. Additionally in the case of small and medium-sized firms a 40% ‘first year allowance’ is available for INVESTMENT in new plant and equipment and a 100% tax write-off (for the three year period 2000/03) for investment in computers and e-commerce. A business may choose its own rates of depreciation for fixed assets which may differ from the statutory capital allowances. Capital allowances may also be varied by the government to encourage or discourage capital INVESTMENT. See DEPRECIATION, CORPORATION TAX.

capital allowances

‘write-offs’ against CORPORATION TAX when a FIRM invests in new plant and equipment. In the UK currently (as at 2004/05) a 25% ‘writing-down allowance’ against tax is available for firms that invest in new plant and equipment. Additionally, in the case of small and medium-sized firms, a 40% ‘first-year allowance’ is available for investment in new plant and equipment and a 100% tax write-off for investment in computers and e-commerce.

Capital allowances are aimed at stimulating investment, thereby increasing the supply-side capabilities of the economy and the rate of ECONOMIC GROWTH. See CAPITAL GOODS, DEPRECIATION 2.

References in periodicals archive ?
In principle, claiming capital allowances is a simple process, provided you know the legislation and related case law.
Any companies considering buying 'expensive' cars in the near future should therefore do so before April 1, 2009 to take advantage of the current capital allowance regime.
We cover all the main relevant areas within corporation tax and beyond -business taxation, including capital allowances, and employee taxation, PAYE and NIC.
As such, I would urge businesses to use the two-year rise in capital allowances, announced at the end of 2012, to make long-term investments in the tools and infrastructure they will need to reach out to international markets.
Government Funded enterprise Zone - Enhanced Capital Allowance Sites All sites receive first year capital allowances at 100% on qualifying plant and machinery to offset against corporation tax if the investment is made before April 2017.
At present, capital allowances on most cars are 25 per cent of the reducing balance, but this is being reduced to 20 per cent, and for 'high emission' cars emitting 160g/km this is going down to 10 per cent.
We increasingly find that clients appreciate the close working relationship we have with other Deloitte '' colleagues, such as our capital allowance, tax and consultancy colleagues
The Welsh Government is hopeful of securing a further consequential of pounds 100m from the Treasury in enhanced capital allowance for the zones, which will provide tax breaks for investment in areas like new buildings and plant and machinery The Welsh Government is in discussions with the UK Government over extending capital allowances beyond Deeside, confirmed as a recipient of allowances by Mr Osborne in last month's Budget.
While the Government had focused on offering Business Rate Relief for firms in the zones, Teesside's plan will also push for huge capital allowances as well as long-term Tax Increment Financing in a three-part plan for the region's economic future.
Recent comments have suggested that tax rates on company profits may be reduced - but with the loss of a valuable capital allowance known as the Annual Investment Allowance (AIA).
But fears have been raised that the removal of the first-year capital allowance for leased business cars, which in effect allows firms to spread the bill over the period the investment is made, could push up the price of providing such vehicles and depress demand.

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