From April 2012, the capital expenditure allowance for businesses drops to £25k from its current threshold of £100k, meaning there is just a few months left to take advantage of the higher allowance.
Mike Adams, a tax specialist at Wellers Accountants said businesses should look at making 'significant purchases' as quickly as possible and also adjust their accounting period to benefit from the higher capital expenditure allowance before it plummets in 2012.
“Last year most businesses could benefit from tax relief on the first £50k of their purchases. This year that threshold was increased to £100k but in April 2012, it will drop dramatically to just £25k," he said.
“The amount of allowance is dictated not only by the precise date of purchase but it is also pro-rated down to the length of the accounting period falling within the relevant budget year. Thus to gain full benefit from the full current £100k allowance, the company would need to have a 12-month accounting period commencing on 1 April 2011 as any other configuration could lead to a loss of allowances."
Adams recommends companies shortening their previous accounting period so it ended on 31 March 2011.
"Where the accounting period does not commence on 1 April 2011, it is quite likely that the timing of purchase of plant and equipment will be such that the total £100k allowance is not used," he said.