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 ?
Capital Allowances are a government tax relief entitlement set up to encourage people to invest in their businesses.
This month the proposed rise in capital allowance, and the new Wales Economic Growth Fund, should both come into play, and will hopefully lead to greater investment within Wales and help businesses plan for their long-term future.
MoneyBee Tax estimates that, on average, for every 100,000[pounds sterling] spent on premises, capital allowances could be claimed on around 30% of it.
To view the World Finance microsite on capital allowances, go to http://www.
Yorkshire Bank conducted a survey which found that only five per cent of SMEs said they had taken advantage of entrepreneurial or research and development tax relief, capital allowances or government investment incentives aimed at improving environmental performance.
Business Minister Edwina Hart said discussions are continuing between Cardiff and London on the viability of extending Enhanced Capital Allowances for Wales beyond Deeside.
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.
But the LEP also wants 10 sites - including the sprawling process hub at Wilton - to get huge capital allowances and six more to be eligible for tax increment finance, which allows firms to use future tax gains to fund investment projects.
Businesses whose year-end is March 31 or April 30 and who are planning on significant capital outlay could obtain pounds 100,000 capital allowances by careful timing of their expenditure - pounds 50,000 before their year end and pounds 50,000 immediately after.
THE reduction in corporation tax rate from 30% to 28% should be good news for all companies, but there is a sting in the tail for property investors - the changes will be paid for by a reduction in capital allowances.
By buying fuel efficient equipment they can get 100 per cent capital allowances in the same year of purchase.
Vodafone said CWW's historic tax losses and capital allowances - claims that help lower taxes - were not "key to the rationale" underpinning the offer.

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