Tax & Accounting News

When to claim Capital Allowances

09/03/2010

Most businesses would be well-advised to ensure they always claim Capital Allowances (CAs), which allow them to claim a proportion of the cost as a deduction in the year of purchase.

If the business has made a loss in the year concerned, the situation may be less clear-cut, as there would be no Corporation Tax (CT) to claim the CAs against. One option would be to simply not make a claim, but that would mean losing the best opportunity to recoup the cost of equipment or buildings purchased that year.

An alternative option would be to claim them anyway and add them to the loss in the year concerned, as those losses can be carried back for up to three years to reduce previous profits and claim a CT refund, or carried forward to offset against future profits.

Therefore, adding CAs to existing losses in a trading year may produce a larger tax refund through carrying back losses or by reducing future CT by carrying the losses forward, than would be realised by carrying CAs forward to a future year.

For more information please contact us.

 

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