Wednesday, March 18, 2015
BNP Paribas warns SMEs over UK tax breaks changes
With the UK's annual investment allowance (AIA) expected to drop from £500,000 (€701,243) to £25,000 on 1st of January 2016, BNP Paribas Leasing Solutions urged SMEs to plan major investments in machinery and equipment before the tax relief cut.
AIA introduced in April 2008, allows most businesses -regardless of their size - to claim tax relief on capital investments.
BNP Paribas said that businesses need to place major orders for investments in capital equipment by the summer, as eligibility for the current Annual Investment Allowance (AIA) of £500,000 will depend on equipment being on site and ready for use by 31 December.
The lessor pointed out that businesses that want to take full advantage of the current tax benefits available for major capital investments and still keep cash flow healthy can choose leasing rather than outright purchase.
They will be able to claim the AIA for investments as long as the item is in use on their premises by the end of December, and will not need to have made all the payments by that date.
"Major capital investments such as a complete IT hardware and systems refit, a combine harvester for a farm, or large-scale excavation equipment for a construction business cannot just be bought off the shelf, and will easily exceed the £25,000 limit that the AIA is expected to fall to," said Tristan Watkins, UK country manager for BNP Paribas Leasing Solutions.
Annual Investment Allowance
BNP Paribas alongside other companies and organisations, like the British Chambers of Commerce (BCC) have called on the Government to use the forthcoming budget to keep the allowance at £500,000.
Watkins said: "Even a couple of years ago businesses were clearly using the AIA to help fund major investments, not just day-to-day capital spending - which is why its use fell so sharply when the limit was cut."
"Now that the economic recovery is taking root and business confidence is returning, we would expect an even larger number of businesses to be looking to the AIA to transform their prospects."
"The AIA has proved its worth in encouraging business investment. Using the forthcoming budget to keep it at its more generous level indefinitely could be transformative for many businesses and indeed for the UK economy. It would ensure that businesses can make the investments they need, at the time that makes most sense for their business."
The lessor highlighted that after the last reduction of AIA in 2012/13 saw a £1.5bn fall in amount of tax relief claimed on capital spending.
AIA was cut by 75% from £100,000 to £25,000 for the 2012/13 tax year. In January 2013, the Government temporarily increased the limit from £25,000 to £250,000. A second temporary rise followed in April 2014, when the limit was raised to its current level.
DATED: 18.03.15
FEED: LL
