The basic definition of the term is that a Capital Allowance is an amount on which you claim tax relief for the wear & tear of the fixed assets. Nearly all of the business who have some kind of assets in the company can claim for this.
Items that can get you Capital Allowance
You will be able to claim the capital allowance if you have;
- An asset bought by yourself for the business.
- Money that you used on the upgrades of machines and workers.
- Money that you used to maintain a good condition of your asset.
Your asset can be anything like shop fixtures & fittings, plant, machinery, Used vehicle accounting scheme, etc.
What Includes a Capital Asset?
A capital allowance can be different for everyone. The value of the capital asset is not the same for everyone every time. If a baker has an oven, it is his asset and may cost him about £400. This oven cannot be an asset for a person with the business of flower and plantation.
You get this allowance on certain conditions and threshold. Sometimes an asset worth £200 is very expensive for a small business but it is nothing to a multi-million company to claim for.
Assets that Qualify to Claim
You cannot claim for everything you buy for your business. Please refer to a detailed list of the assets on the HMRC website.
Procedure and Time to Claim for Allowance
The capital allowance can only be claimed within the year of the expense. You should hire an experienced chartered accountant in London who will help you understand the process in a better way.
You make the claim as part of your Corporation Tax Return or Self Assessment Tax Return.
The Annual Investment Allowance
Under the Annual Investment Allowance scheme, you can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax.
Accountants in Croydon prefer suggesting their clients to carefully consider claiming the capital allowance and using all the relevant schemes under the capital allowance.