Archives for posts with tag: taxation

Child Benefit Clawback

Last month I looked at the relief capping proposal and tried to encourage you all to take part in the consultation process- that still hasn’t commenced and on the treasury website that tracks all consultations it is merely scheduled for the summer.  Keep watching this space or… listening to these podcasts…

This month I’m going to consider another part of the budget proposals intended to claw back part or all of the Child Benefit from certain taxpayers – but before I do I think we need to consider some taxation history.

Until 1973 when a couple married the wife lost her independent status as a human being – I know that sounds awfully dramatic but if a wife wrote to the revenue pointing out that she had paid too much tax on her earnings under the PAYE system the reply was addressed to her husband and the cheque making the repayment was made out to him and not her! 

This was not misogyny on the part of the tax officials, because the revenue could not legally write to a wife at that time. From 1973 onwards they were permitted to write to a wife directly but our taxation system was still based on the family unit and the husband had the legal obligation to return his wife’s income and the overall liability was still his and his alone.

This caused enormous practical problems for a minority of taxpayers – I remember a young man who’d received a letter from the revenue pointing out that he had not returned bank interest – except… he didn’t have any.  Eventually he was pointed in the right direction and asked his wife to provide him with the details that needed to be returned to the revenue – she refused and he was visited by his father-in-law threatening violence if he continued to ask his wife these inconvenient questions!

It was possible for taxpayers to elect to submit separate tax returns and pay their own share of liability but the assessments that were issued were still based on total family income with personal allowances and reliefs being apportioned.  I can remember the practical difficulties of acting for a wife who submitted her own return but her husband used a different firm of accountants and was considerably in arrears in submitting his actual figures.  To make matters worse both firms of accountants were under strict instructions not to correspond with each other and so we had no way of checking the revenue’s calculations!  The only solution was to surreptitiously take the file down to the pub on a Friday night , unofficially meet an opposite number from the other firm and check the figures unofficially!

These practical difficulties came to an end in 1990 with the advent of independent taxation – at last spouses submitted their own returns, were responsible for their own taxation liabilities, and these idiocies of the old system disappeared – that is until the idea of clawing back child benefit was floated.

Child benefit is one of the fundamental building blocks of the benefit system and has been paid, as of right, to individuals resident in the UK for more than six months with responsibility for children – in a couple usually the wife will receive it – it was at one time paid on a weekly basis through vouchers that were cashed in at post offices but is now normally paid 4 weekly into the claimant’s bank account.

It used to be paid only for second and subsequent children but when the special tax allowance for children was abolished many years ago the value of that relief was incorporated into this benefit.  It has never before been subject to taxation.

That it is unfair that a higher rate taxpayer gets the same benefit as a basic rate or even a non-taxpayer seems to have been a suggestion made at a Conservative Party conference which has been subsequently taken up as coalition government policy – and it clearly creates an enormous headache for the revenue who have to implement this idea.

Given the constraints of independent taxation it was decided that the clawback would take place in the hands of the spouse with the highest income where this exceeded the initial threshold, as set in the budget, of £50,000.  1% of the benefit would be clawed back from this person whether they were the actual recipient of the benefit or not for every £100 of their income in excess of £50,000.

Therefore if a taxpayer had income for this purpose of, say, £53,500 then they would suffer a clawback of 35% of the child benefit received.  If the income exceeded £60,000 the whole of the benefit will be clawed back.  Instead of restricting the benefit actually payable it was decided that the clawback would take place through the tax system.

With one child the benefit currently payable is £20.30 per week, for each subsequent child the amount payable is £13.40 per week. The clawback starts, strangely, from 7 January 2013, some people have suggested that this is a needless complexity but for most claimants the amount payable will be known.  If you have three children you will be paid a total of £47.10 per week or £188.40 each 4 weeks.  7th January is simply the first Monday of 2013 and the benefit paid 4 weekly during the remainder of the that tax year would be £565.20, exactly the same for every taxpayer with three children.  The clawback would then be 35% of this figure – £197.82.

For the following year assuming total income was now, say, £56,500 the clawback would be 65% of the benefit.  The benefit has been frozen until 2014 so we know that the amount payable for the year would be £2,449.20 and the clawback £1,591.98.

Now this is income which has already been taxed at 40% and if earned income is also subject to NIC of a further 2%.  The more children a taxpayer has the greater the benefit they will have received and so the larger the clawback they will be subject to. With three children the effective total tax rate at this level is 66.5%, with eight children the effective tax rate is 101.34%!

If the income is derived from a company which the taxpayer controls the effective liability is even greater when employers’ NIC get added into the equation.

Income is measured in the same way that it is measured for the clawback of personal allowances that takes place at £100,000 worth of income.  This means that the gross equivalent of pension contributions, personal pensions, stakeholder pensions etc and the gross equivalent of gift aid donations, reliefs usually given by extending the taxpayer’s basic rate band will actually be deducted from income for the purpose.  Incidentally if the effective tax rate is more than 100%, as it can be for very large families, then the effective tax relief available for these payments is in excess of 100% as well!  It is possible, by careful planning, to keep income just below the clawback figure and so avoid the liability.

It is unfair that where one taxpayer earns substantially more than the other the one with the higher income is subject to the clawback.  Where a couple each have income of £49,999 their joint income will be £99,998 and yet as neither has income in excess of £50,000 no clawback will occur, whereas a taxpayer with income of £50,500 will suffer a 5% clawback.

Taxpayers with their own companies or partnerships may be able to divide income between themselves to avoid or at least minimise the clawback that may occur.  They could also transfer income producing assets to the other partner to avoid the clawback.  Of course this is only possible if you know what your income is going to be in the tax year.  Pension contributions cannot be carried back to the year before but interestingly gift aid donations can be.

Lets look at some of the other practicalities involved…

The clawback will be recovered through the self-assessment system which may mean that having attempted, successfully, to reduce the number of taxpayers subject to self assessment there will now be a dramatic increase in the number of taxpayers subject to self assessment.  The clawback could also take place through the PAYE system for certain taxpayers but this would often involve delay in determination and collection of the liabilities involved.

It will be applied to single parents of course but couples will have to decide who is the one with highest earnings – fine if they are prepared to sit down and discuss their financial affairs with each other but if they don’t, or won’t… This brings back the spectre of couples deliberately not revealing their income to each other or even simply getting it wrong.

Suppose Alan earns £57,000 per annum and his wife, Zena, earns £54,000 – it seems clear that Alan is subject to the clawback.  Suppose he was encouraged by a financial adviser to pay £2,880 into a stakeholder pension some years ago and this is paid through a direct debit.  When they are talking about this Alan forgets this and so he becomes subject to clawback until he puts the premium paid on his return, this is grossed up to £3,600 and Alan’s income is now £53,400 and so it is Zena who should have been subject to clawback. She can be penalised for failing to make this adjustment to her liability.

To make matters worse still the legislation says that it applies to couples who are married to each other and also to civil partners.  But it will also apply to people who live together as though they were married and also to couples who live together as though they were civil partners.  This is a potential minefield.

Let’s suppose that Beatrice is a single mother earning £20,000 as a teaching assistant, her best friend Charlotte is also single and earns £65,000 and has her own house.  Knowing how tough life is for Beatrice Charlotte asks her to come and live with her and Beatrice gladly accepts.  Are they living together as though they were civil partners?

This is not as straightforward as it may seem.  The law permits any two persons of the same sex as each other to register a civil partnership provided that they are not already married to someone else, or in a civil partnership with someone else, and are not within the prohibited degrees of relationship – close relations like brothers and sisters.  Civil partnership resembles civil marriage in all respects bar one.

And this is why people have advocated so-called “gay marriage” even though a civil partnership is treated as though it were marriage for all practical legal purposes.  You do not need to be homosexual or to have a homosexual relationship to enter into a civil partnership so – are Beatrice and Charlotte living together as though they are civil partners?  I am not sure that anyone would like to have to answer this question or even ask it, but this legislation may make this unavoidable.

To satisfy an off-the-cuff political statement the revenue have been forced to create a considerable trap for the unwary, a deeply unfair and potentially divisive system – this is what happens when we let politicians dabble in our taxation system.  It may see the return of the crazier aspects of taxation that applied before independent taxation was created. Oh dear!


Budget 2012

George Osborne’s budget is the first under the budgetary process in full.  This involves an announcement made in budget 1 (in this case the 2011 budget on 23 March) being subject to consultation over the summer, then the draft finance bill measures are published in December for consideration.  If adopted they are included in the budget statement No 2, this year on 21st March and then published as part of the actual finance bill, this year expected on 29 March.  The measures are considered by parliament and the final amended version emerges in the middle of July.

Meanwhile advance announcements in this budget in 2012 will be consulted on this summer, included in a draft bill next December, and then adopted in the Finance Act 2013 after next year’s budget.

One measure which was going to included in this year’s finance bill was the new statutory residence test we discussed in October last year.  This is to be postponed and will now be brought forward for inclusion in next year’s finance bill, the rules becoming operational from 6 April 2013.  We also learn that the concept of ordinary residence is to be largely abolished and it’s effect preserved in connection with certain overseas duties.

A number of measures in this year’s budget have started with consideration by the Office of Tax Simplification – and one of these seems to have backfired on the government. You’re probably aware that the office started off looking at IR35 and redundant tax reliefs.  It then went on to consider small businesses and some it’s recommendations are adopted here including allowing businesses with a turnover below the VAT registration threshold, called ‘Nano’ businesses, to use the cash basis rather than the full GAAP which, in strictness, they should be using.  OTS think that 65% of the smallest businesses, many not using accountancy services, are using this method anyway!

The OTS went on to look at two further areas, issuing initial reports but not final recommendations; one of these concerned employee shares schemes, the other taxation of the elderly. They identified the problem that the tax affairs of elderly people are quite complex, they often have several sources of pensions and income, often dealt with by different districts and, if the taxpayer’s income is below £29,000, they have been entitled to a higher tax allowance when reaching 65 and a higher allowance still on reaching 75, although if their income is just below £29,000 the higher allowance is subject to clawback.

In the meantime the coalition have been pursuing the idea of substantially increasing the normal personal allowance to take increasing numbers of people outside of the scope of IT.  From April 2012, as was announced in 2011, the personal allowance goes up by £630 to £8,105 and to balance this the higher rate threshold is reduced by £630 from £35,000 to £34,370.  This budget provided that next year, from April 2013, the allowance would increase by £1,100 to £9,205, although the higher rate band threshold would reduce by rather more, £2,125, to limit the benefit of the allowance increase to higher rate taxpayers to 25% of what a basic rate taxpayer benefits by.

Now we know that the Lib Dems want to increase the allowance to at least £10,000 and if this allowance eventually exceeded the higher amounts of the age allowance, and of course you can’t have an allowance which is lower that the personal allowance so the age allowance can be done away with then the complexity of the age allowance and the clawback of the additional relief which gives affected taxpayers a marginal rate in excess of 20% could be done away with.

But George has jumped the gun.  Before the OTS makes its final recommendations and before the ordinary personal allowance has caught up with the age allowance George has decided to accelerate its withdrawal – this is the so-called “Granny Tax”.

The age allowance will be restricted now to those who reached the age of 65 before 6 April 1948 and the higher level of the allowance will only be available to those born before 6 April 1938.  It is also going to be frozen, which is the main complaint of the grannies, that in inflation adjusted terms they will be worse off. Although the pension may well be increased next year to compensate those persons who are affected by this ‘granny tax’, the increase in liability of those whose allowance is frozen has been seized upon by the press.  It reminds me of Gordon Brown’s ill-fated attempt to ‘simplify’ the tax system when he controversially eliminated the 10% starting rate for all income other than savings income.

It is made all the worse because George also decided to reduce the 50% rate to 45% on the grounds that the higher rate was counterproductive, it may well be that it is, HMRC figures seem to suggest it, but of course it makes it look as though he is taking from pensioners to transfer to the very wealthy.

In an historical sense this budget will be seen as the one where the government and the revenue finally accepted the need for a General Anti-Avoidance Rule or GAAR; given the number of targeted rules (TAAR) implemented since 2006 when the first one was introduced (concerning capital losses for CT purposes, and was so successful that it was extended a year later to individuals and trusts for CGT purposes) this should enable a significant reduction in the length of taxation legislation and may allow abolition of individual TAARs which now litter the legislation and account for much of the length of recent Finance Acts.

In the past HMRC have been reluctant to introduce this sort of measure, even though it is a potent one in the war against avoidance, because of the need to have a parallel clearance mechanism so that business can achieve certainty before entering into transactions.  It is claimed that Canada – who introduced a GAAR without a clearance mechanism – have suffered as a result.

Graham Aaronson QC, who suggested the GAAR in a report commissioned in last year’s budget, believes that it is possible to have such a rule as a limited GAAR, Sounds like a contradiction in terms which would allow ‘reasonable tax planning’ and so would not require new clearance mechanisms.  It remains to be seen whether it could be effective, as the arbiters of reasonability in the first instance would be – the revenue, although the final decision would be up to the Tribunals and the Courts.

Investors may have a quite unique opportunity in 2012/13 to secure 78% tax relief – it works like this…

Genuine small start-up businesses can use a scheme to raise capital called the Seed Enterprise Investment Scheme or SEIS – this offers investors a tax reducer relief of 50% which they can set against this year or last year’s liability regardless of the rate of tax they actually pay.  But they can do better than this – if they also make gains during the year 2012/13, and they would be advised to do so if they can, these can be matched against the investment into the SEIS and will be exempt from CGT.  Now the ordinary EIS offers 30% relief and deferral of gains, but this is a genuine exemption worth a further 28%.

Middlemen have already started to try to attract investors and match them with suitable small businesses.  It is obviously very high risk but the relief available may make it worthwhile.

Company cars are subject to good news and bad news – lets look at the… good news first.  From April 2013 the current scheme which gives a business 100% relief on the cost of a car which emits less than 100 g/km of CO2 was to come to an end.  It will now be extended to 2015 but at a slightly lower emission limit of 95g/km.

You can still get an Alfa Romeo Mito 1.3 diesel and claim a 100% FYA after April 2013 but if you want an Audi A1 Sportback you’ll need to be quick as it will cease to qualify after April 2013, its emission value is 99g/km – unless the manufacturer improves efficiency even further.

The Bad news? – well there’s rather a lot of it… cars which emit more than 130 g/km but less than 160 g/km will qualify for an 18% WDA until April 2013, but from that time onwards purchasing such a car will give you a writing down allowance of 8% pa only which at the moment only applies to cars with an emission figure in excess of 160 g/km.

In addition between April 2014 and April 2016 several changes are to be made to the company car benefit in kind scheme which will see the benefit in kind, in other words the tax liability, on some vehicles increasing by 25% over this short period, or indeed even more!  If you have a zero emission vehicle, which at the moment has a zero benefit in kind, from April 2015 onwards you will have a 13% benefit and in the following year this will be increased by a further 2% to 15%.  The maximum percentage for company cars is going to go up as well, it is at the moment 35% but will increase to 37%.  From April 2016 onwards you will no longer need to add the extra 3% for a diesel vehicle.

The announced reduction in the rate of corporation tax from 26% down to 24%, where last year we were told that the rate would go down to 25%, was a welcome reduction for larger companies with profits in excess of £300,000, and next year and the year after the rate will go down to 23% and 22% respectively.  But what of the lower 20% rate that applies to profits up to £300,000?  Would that be reduced as well?

The problem is that if this rate is reduced a 40% taxpayer taking a dividend from a company would be liable to a combination of corporation tax and income tax on the dividend which would be less than 40%. This was the mistake made some years ago by Gordon Brown, in reducing the rate to 19%, which he compounded by increasing national insurance so that a self-employed taxpayer was liable at 41% but dividend extraction from a small company attracted a liability of only 39.25%.

In a throwaway comment George indicated that he intended the main rate to fall even further to 20% in the future when there would then be one rate of tax applying to all companies regardless of size and the marginal relief calculation, necessary for profits between £300,000 and £1,500,000 to avoid a large jump in liability would no longer be needed and the complicated Associated Company rules, which were only reformed in last year’s Finance Act would also not be necessary.

In addition to increasing R&D relief further for small and medium sized businesses, a welcome change, he also confirmed the introduction of the idea of a “patent box”.  Originally dreamed up by his predecessor, Alistair Darling, this would mean that profits derived directly or indirectly from the exploitation of patent rights would be charged at an effective rate of 10% from April 2013 onwards and it worth noting here that this is not confined to patent royalties but also the trading profits that manufacturers derive.  As a response to this and the general reduction in CT liabilities Glaxo SmithKline have already announced a half a billion pound investment in UK manufacturing.

The CFC, Controlled Foreign Company, regime is extensively overhauled as announced last year to prevent it falling foul of EU discrimination laws and will only apply where profits are artificially diverted away from the UK by larger companies, rather than applying by default at the moment unless you benefit from an exemption.

A number of VAT anomalies have been removed from 1 October 2012 so that enjoying a hot chicken from your supermarket, drinking sport nutrition drinks, using self-storage facilities, even going to the hairdresser now that self employed stylists will not be able to rent chairs in a salon on an exempt basis could all become more expensive.

When the last government implemented SDLT, Stamp Duty Land Tax, in 2003 a number of bodies suggested they were too hasty in doing so and since then every year has seen further attempts to limit tax losses caused, at least in part, from the revenue’s Stamps Office seemingly not understanding real world property transactions. Of course, before SDLT came in, they were experienced in valuing legal documents but were not required to be aware of other transactions.

Residential properties costing more than £2,000,000 will now be subject to a 7% rate of SDLT and where companies have been used to acquire this sort of residential property there will be a 15% liability on the transfer into the company, because subsequently the shares can be transferred at a much lower Stamp Duty liability of 0.5% or outside the UK with no liability at all – other measures will include charging gains on the sale of property within these offshore companies to CGT and even a version of Vince Cable’s vaunted mansion tax where a company is used as an envelope to avoid liability.

This podcast can only skim the surface of the budget provisions and further information can be obtained from the revenue and treasury websites. There is a 206 page document “Overview of Tax Legislation and Rates” containing details of all of the budgetary changes which can be downloaded from and The Chancellors full budget report, the ‘Red Book’ as it is called is available from

Capital Allowances – A Complication

Hi – I’m Paul Soper and this is the first of another series of Podcasts focussing on recent developments in Direct Taxation in the UK intended primarily for practitioners – especially small practitioners.  But if you are a reasonably financially literate taxpayer you might enjoy it too – if enjoy is the right word!  In the past these podcasts have been prepared on a sporadic basis but they will now become monthly – so this is the September 2011 edition.

Significant changes are being made to the Capital Allowances system from April 2012 onwards, this podcast looks at a particular problem which some taxpayers might face where action may be needed now.

It is often said that capital allowances are simply the tax equivalent of accounting depreciation, depreciation being added back and capital allowances deducted in arriving at trading profit.  However you don’t need to charge depreciation to be able to claim the allowances and many assets don’t qualify for capital allowances at all, and that list became longer with the abolition of the Industrial Buildings Allowance and the Agricultural Land and Buildings Allowances from April 2011 onwards.  In truth – Capital Allowances are and always have been an incentive to invest and should be considered as such.

Until 2008 expenditure on Plant and Machinery by businesses qualified for two types of allowance for tax purposes – a first year allowance which certain businesses could claim and a writing down allowance which enabled remaining expenditure after deduction of the first year allowance to be written off over a number of years.

Before 2008 the main rate of the writing down allowance was 25% but in that year three important changes occurred.  Firstly the main rate was reduced to 20% and then a new category of writing down allowance at the rate of 10% was created for expenditure on integral assets, like lifts and escalators, central heating and air conditioning, installed in a building.  However the special rate pool as it was called also included expenditure on the thermal insulation of commercial buildings and private motor vehicles which had a stated CO2 emission in excess of 160g/km.

Businesses could also claim an annual investment allowance of up to £50,000 for expenditure on assets of either type, with the exception of cars and leased assets.  This was of enormous benefit to smaller businesses, particularly those with expenditure within this limit who could now claim the equivalent of a First Year Allowance on practically all they spent except for private motor cars and leased assets.

The system retained the First Year Allowance as well – at a rate of 100% for certain energy and resource efficient assets, which I’ll return to later.

 From April 2010 onwards the amount of the Annual Investment Allowance was doubled to £100,000 but for any business whose accounting date was not 31 March or 5 April the allowance for expenditure before those dates was limited to the allowance that would have applied on the date of the expenditure – limiting the total that could be claimed to £50,000.

When they came to power the coalition government announced that these rates would change from April 2012 onwards, the writing down allowance of 20% being reduced to 18%, the special rate pool allowance of 10% being reduced to 8% and the annual investment allowance being reduced to £25,000.  These changes were given legal effect in Finance Act 2011 but one change has a rather nasty side effect which we have to watch carefully.

If the accounting date of a company is 31 March one merely needs to apply the correct rates to the accounting period in question, the same being true for an individual sole trader or partnership with an accounting year end of 5 April, or by concession 31 March where they can pretend that the accounting date is 5 April.

But if anyone uses an accounting date other than these there is a problem, lets look at an example.

Consider a company called Gideon Ltd which prepares accounts each year to 31 December.  On 14th April 2012 it spends £40,000 on several new machines.  For the year to 31 December 2012 it will be necessary to calculate the appropriate hybrid writing down allowance as for the first three months of the year the rates were higher than for the remainder of the year.  This calculation must be done on a daily basis and there are 366 days in this accounting year because of the leap year.

The appropriate fraction is 91/366ths for the allowances of 20% and 10%, and is 275/366ths for the later lower allowances of 18% and 8% giving hybrid allowances of 18.5% and 8.5% respectively.

Had this been a sole trader or partnership of individuals, where the change in the rate occurs on the 6th of April, the fractions would be 96/366ths and 270/366ths giving rates of 18.52% and 8.52% respectively.  Allowances are always rounded up where necessary to two decimal places.

However the catch comes when we look at the annual investment allowance.  This was introduced in 2008 at the level of £50,000 and then doubled to £100,000 in April 2010, just before the general election.  Now it is being reduced to £25,000 from April 2012, again requiring a hybrid calculation, but this time we can choose between using a daily basis or a monthly basis – as long as our use is consistent.

So the company will be entitled to claim either 3/12ths of £100,000 plus 9/12ths of £25,000 – that’s £43,648 or on a daily basis 91/366ths of £100,000 plus 275/366ths of £25,000 – which is £43,750  – the monthly basis seems best although only by £102.

 But Gideon Ltd cannot claim the whole amount because the expenditure was incurred after the 31st of March.  The Finance Act 2011 specifies a different limit for expenditure after 31st March, or for an individual 5th April to the limit that was applied when the allowance was doubled in 2010.  This new method requires the taxpayer to treat the period after 31st March or 5th April as though it were a completely separate accounting period, in this case one which is 275 days or 9 months long.  9/12ths of £25,000 is £18,750, whereas 275/366ths is £18,785.  This means that if there is no other expenditure the daily basis should be used giving a maximum allowance which is £35 higher.

If we were looking at a taxpaying individual the fractions would be 3/12ths plus 9/12ths giving a total, as before of £43,750 or 96/366ths plus 270/366ths giving a total of £44,673 for the whole year. The daily basis seems to give a total allowance which is £922 more, but on a daily basis the amount that relates to the period from 1 April onwards is only £18,442 rather than the £18,750 available on a monthly basis, £308 less.

Of course this means that there is no hard and fast rule of thumb, in each case the calculations should be made on either a monthly or a daily basis, but you cannot pick and choose.

It also means that if you had an accounting period ending earlier in the year the limit of relief available on expenditure incurred after 31st March or 5th April would diminish – with a 30th April year end the limit on expenditure incurred after those dates would be a maximum of £2,083.

Clearly the amount of the Annual Investment Allowance available will be affected by the accounting year but also by the date on which the expenditure was incurred so this begs the question – can you change the date by reference to which the capital allowance is given?  If we look at the legislation contained in the Capital Allowances Act of 2001 we discover that the date on which capital allowances are given is not, as is commonly thought, the date on which the contract is entered into.  Nor is it the invoice date, the date on which the asset was brought into use or the date of payment, well – normally.

 It is the date on which you become legally obliged to make a payment and with the co-operation of the vendor of the machinery it may be possible to specify a date before 1st April which would allow Gideon Ltd to claim the whole £40,000.  This would apply even if Gideon Ltd still made the payment on the same date as before.  There is an anti-avoidance provision so that if payment is made more than 4 months after the obligation date the allowance is then determined by the date of payment.

 Another possibility would be to change the company’s accounting date so that it ended on 31st March – this would leave the expenditure in a later period that did not straddle 31st March and a whole £25,000 could be claimed, albeit a year later.

 So – action is needed now by any business planning to spend substantial sums on plant and machinery.  Even if you have a 31st March or 5th April year end, so the catch doesn’t apply, accelerating relief into the year to 31st March or 5th April 2012 could give you up to four times the relief that expenditure after that date will bring.

 There is one more important consideration for Gideon Ltd – is it possible that the new machinery qualifies as energy efficient by the criteria laid down by the Department of Energy and Climate Change?  This can be checked at  If it is then quite separately from the Annual Investment Allowance system a 100% First Year Allowance will be available for the qualifying expenditure.

It is worth noting that this also applies to water efficient technologies and to cars with a CO2 emission of 110g/km or less.  However the relief for cars will come to an end, at present, from April 2013 onwards.  Do not be misled here by the website which suggests initially that the 100% allowance for certain cars ended on 31 March 2008.  The website has not been properly updated – follow the car link through to the HMRC website and you will eventually uncover the right information which is available in the revenue’s capital allowance manual at page CA23153.

This podcast taxt was presented, written and produced by Paul Soper who asserts copyright therein.  The older podcasts can be accessed from and the new series of which this is the first from as well as from Apple’s iTunes store where they are available to download for free.

For further details of podcast production, particularly if you would like me to create them for you, contact me at