The Bottom Line - Winter 2015

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T O P I C A L I N F O R M A T I O N F R O M M A G E E G A M M O N
Email: Website:
Henwood House, Henwood, Ashford, Kent TN24 8DH Phone: 01233 630000
Principals: Jon Gammon, Antony Tutt, Mark Britland, Abhi Jain, Roland Parry, Andy Childs
Managers: David Brookes, Julie Devine, Dan Edwards, Linda Hayward, Peter Horton, Barry Spokes
Magee Gammon is a trading style of Magee Gammon Partnership LLP and Magee Gammon Corporate Limited.
Registered to carry on audit work in the UK and Ireland, and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.
Staff Matters
We would like to welcome Dan Edwards
who has joined us as a Senior Manager.
Dan specialises in accounting and tax
for companies, partnerships and sole
traders and Solicitors Accounts Rules
examinations.
Welcome also goes to Fern Murphy who
has recently joined the team as a trainee
accountant and is studying for AAT
qualification.
MG NEWS
Changes to the Annual Investment Allowance:
getting the timing right
The Annual Investment Allowance (AIA) is due to
fall from £500,000 to £200,000 with effect from
1 January 2016. Transitional rules will have an impact
on the amount businesses can claim, so it is important
to plan ahead if you want to receive the maximum tax
benefit.
What is the AIA?
The AIA enables businesses to deduct the full cost of plant and
machinery (excluding cars) from their profits in the year of purchase.
It applies to businesses of any size and most business structures, but
there are provisions to prevent multiple claiming. Businesses are able
to allocate their AIA in any way they wish; so it is quite acceptable for
them to set their allowance against expenditure qualifying for a lower
rate of allowances (such as long life assets or integral features).
How much can I claim?
The AIA was temporarily increased to £500,000 from 1 April 2014
for companies or 6 April 2014 for unincorporated businesses,
until 31 December 2015. It had been due to fall to £25,000 from
1 January 2016. However, in his Summer Budget on 8 July, the
Chancellor announced that the AIA will instead be set at £200,000.
Accounting periods spanning the change
Where the accounting period spans 31 December 2015, the maximum
amount of AIA entitlement is calculated on a pro-rata basis.
For example, if Brown & Co’s accounting period begins on
1 April 2015 and ends on 31 March 2016, approximately three
quarters of that period would fall before the date of the change
(1 January 2016) and approximately one quarter would fall after
that date. Brown & Co will be subject to a transitional AIA maximum,
calculated as follows:
Dates Fraction of
period
Allowance
for full year
Transitional
allowance
01/04/15 –
31/12/15
9/12 £500,000 £375,000
01/01/16 –
31/03/16 3/12 £200,000 £50,000
Transitional
AIA maximum £425,000
Timing expenditure for maximum relief
As demonstrated in the above example, the maximum AIA for
expenditure incurred before 1 January 2016 is £425,000. However,
where expenditure is incurred on or after 1 January to 31 March 2016,
the maximum amount of relief will only be £50,000. Therefore, if you
want to gain the maximum benefit of the £500,000 AIA, it may be
advisable to purchase plant and machinery before 31 December 2015.
If this is not an option, you might want to delay expenditure until
after 31 March 2016, when the AIA will be set at £200,000. Note that
tax relief will have been deferred for a full year.
Careful consideration should be given to the timing of
any expenditure to ensure you are able to maximise the
available relief. Please speak to us for further advice.
Winter 2015/16 inside this issue…
u u Help to Buy: the ISA for first-time buyers
u u A five step plan for dealing with negative
reviews
u u Workplace conflict: resolving staff disputes
u u Business Round‑up
u u Web Watch
u u Reminders for your Winter Diary