Making The Most of Capital Allowances 2009-10

If you are thinking of investing in assets that qualify for the Annual Investment Allowance (AIA) during 2009-10 it is worth bearing in mind the additional relief you can claim to take advantage of the 40% First Year Allowance (FYA) that is available for one year to 5 April 2010 (1 April 2010 if you trade as a company.)

For most businesses the only assets that do not qualify for the AIA or the FYA are motor cars. Although don't forget that if you buy a car with CO2 emissions under 110g/km a special 100% allowance can be claimed.

The AIA allows you to write off 100% of qualifying expenditure during 2009-10 up to a total spend of £50,000.

But what happens if you spend more than £50,000? Let's say you invested £80,000 during 2009-10 in assets that qualify for the AIA and FYA. You would be eligible to claim the maximum £50,000 AIA and a 40% FYA on the excess. This would make your potential, combined claim £62,000, or an overall 78% tax write down in one year.

Even if the claims created net tax losses in 2009-10 this may enable your business to recover some of the tax paid in the previous three years.