If you own a business or company, it is your obligation to pay taxes to the state. The fact that businesses pay heavy taxes leaves them feeling financially burdened. Therefore, businesses should look for ways of getting tax relief and reduce some of the burden. As a way of reducing tax bills, businesses can claim capital allowances. In this article, we will outline all the helpful information that one need to know regarding capital allowances. Capital allowances is a tax credit that a business can claim on the basis of their expenses and capital expenditure. At times this aspect capital allowances can be learnt through an online platform. Having a link will give direct connection to the internet. Getting a connection to that site will enable you to learn more. A tangible asset that brings benefit to a business is referred to as capital expenditure. For the asset to qualify for capital allowance, it must be owned by the business and not leased.
Annual investment allowances, first year allowances and writing down allowances are the three main types of capital allowances. A business can be able to deduct the full value of an asset that is already being used under the annual investment allowance. Once a business obtains an asset; they must claim the deductions on the same year if they have chosen annual investment allowance. The fact that many assets fall under annual investment allowance, it calls for a business to gather information for them to leap more. Under first year allowance, a business can be able to claim based on the total cost of the asset. You will note that this type of capital allowance was introduced in order to encourage businesses to use eco-friendly equipment that are water and energy efficient. When it comes to first year allowance, water saving and low carbon dioxide equipment are the ones that qualify.
Once a business is not able to claim their deduction under annual investment and first year, they can still do so if they choose writing down allowance. Unlike other types of capital allowances, deductions under writing down are not done at a go but over a period of time. Whichever type of capital allowance you choose, your business will benefit a lot as your tax bill will be reduced. A business can seek the services of an expert in advising them on the assets that qualify for capital allowance after listing all the assets they possess. Another benefit of capital allowances is that the business gets a reduction in taxes hence are left with some money that they can use for expansion. The money pumped back into the business after tax deduction plays a big role in economy growth. A business can be part of making our environment better if they use eco-friendly equipment which is encouraged by capital allowances.