Magee Gammon Partnership LLP (M112)_BM August18 # (002)

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T O P I C A L I N F O R M A T I O N F R OM M A G E E G A MMO N
Henwood House, Henwood,
Ashford, Kent TN24 8DH
Phone: 01233 630000
Email:
Website:
Principals: Jon Gammon, Antony Tutt, Mark Britland, Abhi Jain, Roland Parry, Andy Childs
Managers: Julie Devine, Linda Hayward, Peter Horton, Barry Spokes, Andy Vanburen, Steven Wanstall
Magee Gammon is a trading style of Magee Gammon Partnership LLP and Magee Gammon Corporate Limited.
Registered to carry out 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.
Considering enhanced capital allowances
Businesses which invest in energy-saving plant or machinery may be able to take advantage of an additional tax break.
Capital expenditure is covered by the Annual Investment Allowance
(AIA), which gives full tax relief for capital expenditure in the
year of purchase, and covers most plant and machinery up to an
annual limit of £200,000. Where expenditure exceeds the AIA, the
balance is dealt with via an annual writing down allowance (WDA).
The main WDA is currently 18%.
There are, however, some types of expenditure which are only
eligible for a WDA of 8%. There are also separate rules for cars,
which do not qualify for the AIA.
In addition, there may be occasions when a business could benefit
from Enhanced Capital Allowances (ECAs).
What is an ECA?
ECAs are designed to encourage investment in energy-efficient
equipment, the initial cost of which often can be more expensive
than other products. ECAs offer accelerated tax relief by giving
a 100% capital allowance in the year of purchase. A business can
therefore benefit where total capital expenditure is more than
£200,000.
An ECA may have the effect of turning an accounting profit into
a tax loss. Where an ECA claim by a company (but not an income
tax business) creates or increases a tax loss, the loss attributable to
ECAs can be surrendered for a cash credit.
The loss can only be exchanged for a cash credit if it has first
been relieved against other profits, including group relief. In other
words, where the unrelieved loss would otherwise be carried
forward an exchange for a cash credit is possible. The cash credit
was 19% until 31 March 2018 but has now reduced to two-thirds
of the corporation tax rate in force for the accounting period. The
maximum cash exchange is either the company’s PAYE and national
insurance liabilities for the year in which the claim is made, or
£250,000 if greater.
ECAs are claimed via the corporation tax return or income tax
return and it is important to keep records of any purchases or
installation costs.
Qualifying energy-saving technology
ECAs are available on the purchase of specific high-performance
energy efficient equipment, such as boilers, electric motors, air
conditioning and refrigeration systems. Water-efficient technology
products such as taps, toilets and industrial cleaning equipment are
also eligible.
The Energy Technology List (ETL) identifies particular products
which perform to ultra-high levels of energy efficiency. A full list of
qualifying products can be found here: .
The Water Technology list consists of 14 categories of water
technologies on which ECAs can be claimed, and can be found
here:
The list of eligible assets is updated frequently. Claims for ECAs
can sometimes fail as a result of misinterpretation of exactly which
products qualify, and it is important that the list is checked when
relevant expenditure is made.
We can help with claiming enhanced capital
allowances, as well as advising on the
timing of capital expenditure. Please
contact us for further advice
and assistance.
August 2018
inside this issue…
u u Funding your business’s needs
u u Spotlight on mental health in the
workplace
u u Making the most of Gift Aid
u u Business Round-up
u u Web Watch
u u Reminders for your diary