AIA replacing FYA >05.04.08
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I'm doing some tax planning for a client and their intention to purchase a significant asset this year... but what if he waits?
Can I just run my understanding of the new AIA's by you;
Capital Investment <05.04.08 - FYA rules?
Capital Investment >05.04.08 - AIA rules?
Just on the AIA then:-
You are able to make Capital Investments of whatever you like but only the first £50,000 will be allowable - basically like a 100% FYA?
If you spend over the perscribed £50,000, say £75,000 would you get the full £50,000 PLUS the 20% WDA on the balance i.e. £25,000?
Or is it; you would get the full £50,000 then the balance of £25,000 being carried forward to attract the 20% WDA in the following year?
For small/medium sized businesses it appears to make sense to hold off until post 05.04.08 to invest (where possible), would you agree?
Surely these new rules are going cause a nightmare for us agents that prepare limited company accounts?... I've tried explaining deferred tax to a client once before - never again! For owner managed businesses that don't even look at their accounts, it is just a complete waste of time!!
Come on, which of you had no interest in the 2007 budget and have no idea what I am on about?
Regards
Dean
Can I just run my understanding of the new AIA's by you;
Capital Investment <05.04.08 - FYA rules?
Capital Investment >05.04.08 - AIA rules?
Just on the AIA then:-
You are able to make Capital Investments of whatever you like but only the first £50,000 will be allowable - basically like a 100% FYA?
If you spend over the perscribed £50,000, say £75,000 would you get the full £50,000 PLUS the 20% WDA on the balance i.e. £25,000?
Or is it; you would get the full £50,000 then the balance of £25,000 being carried forward to attract the 20% WDA in the following year?
For small/medium sized businesses it appears to make sense to hold off until post 05.04.08 to invest (where possible), would you agree?
Surely these new rules are going cause a nightmare for us agents that prepare limited company accounts?... I've tried explaining deferred tax to a client once before - never again! For owner managed businesses that don't even look at their accounts, it is just a complete waste of time!!
Come on, which of you had no interest in the 2007 budget and have no idea what I am on about?
Regards
Dean
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Comments
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Re:AIA replacing FYA >05.04.08
Why they couldn't just leave capital allowances alone I will never know. The Treasury seem hellbent on making things even more complicated than they already are. Your dates are right in that expenditure incurred prior to 5.4.08 will be dealt with under the existing capital allowances regime. Expenditure post 5.4.08 will come under the revamped regime.
All qualifying expenditure up to the £50,000 AIA will receive 100% allowances. The Treasury have made this decision to encourage capital investment! Any additional expenditure over and above the £50,000 will be dealt with using the normal capital allowances rules i.e. the balance will enter either the 10% or 20% pool depending on what it is.
There was an article written very recently on accountingweb which mentioned various tax planning techniques which would "trap" the existing capital allowances which could be beneficial. Try doing a search on accountingweb to see if you can see the article.
In terms of OMB's, capital expenditure planning would depend on their individual circumstances. Of course, a 100% FYA is obviously better than a 50% FYA but if they are more likely to pay higher rates of tax next year then it would seem sensible to defer the expenditure for the sake of 6 months.
Kind regards
Steve
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Re:AIA replacing FYA >05.04.08
Thanks for the confirmation Steve.
Regards
Dean0 -
Re:AIA replacing FYA >05.04.08
Just to add:
The changeover date is 1st April 2008 for companies.
Oh, and as for deferred tax...
...it's always immaterial isn't it?!
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