Capital Allowances

Capital allowances enable your business to save tax when it purchases a capital asset. Businesses pay tax on their profits, but not all the costs associated with running a business are ‘allowable for tax’. This means they need to be added back to your business’ profits before the tax can be calculated. Capital assets tend to be rather expensive compared to day-to-day running costs, though some of the value can be shown in the form of an everyday wear and tear running cost which reduces your profit for every year you are using it. This process is known as ‘depreciation’.

Machinery, equipment and vehicles

It is not possible to gain tax allowances for depreciation, but you can instead deduct the capital allowance from your profit before tax is worked out. Capital allowances aren’t just for physical assets such as machinery – they can also cover things like software and patents. They are designed to write off the cost of vital business assets over a period of time or in some cases during the first year.

What are Enhanced Capital Allowances?

Enhanced Capital Allowances were first introduced back in 2001 to encourage businesses to purchase eco-friendly equipment including carbon-free, energy-saving and low carbon emission plant and machinery. If you purchased a qualifying item prior to April 2001 and bought it first-hand, you may be able to offset Enhanced Capital Allowances against the purchase cost of such items.

Reduce the impact on cash flow

Buying new equipment for your company can have a considerable impact on cash flow. If you are considering purchasing machinery, equipment or a vehicle that you think might be permitted by Enhanced Capital Allowances rules, we can provide you with all the advice and support that you need, assessing the item before you proceed with your purchase.

Payable tax credits

It may be possible for you to take a payable tax credit rather than the 100% qualifying reduction if your company is making a loss. You can only gain this tax credit if you are a limited company. With our help, you can potentially maximise your capital allowances claim. It’s essential to talk to a qualified chartered tax accountant and adviser beforehand if you are considering purchasing costly equipment for your business.

Why choose Perrigo Consultants?

At Perrigo Consultants, we offer jargon-free advice on tax and accountancy for small businesses. We have vast expertise in the field of Enhanced Capital Allowances and are always on hand to assist you whenever you need accurate, useful and valuable advice on tax and accountancy. To find out more, contact us on 01299 488860, send an e-mail to or use the contact form on our website. We can offer you a FREE confidential no-obligation consultation to assess your current requirements and help you take advantage of a range of accountancy services. To learn more about capital allowances and how they can benefit your business, contact us today.