If you’re reading this, you are most likely a business owner. Small or large, local or national, you almost certainly want to find ways to cut your corporation tax bill. Fortunately, there are methods for doing this, all of which are completely above board. To achieve this, you’re going to need some expert financial planning to help you through it.
Were you aware that for the last calendar year (2019) and the current calendar year (2020), businesses that invest in assets are able to claim their investment back against profits made during the year of purchase and use? This scheme has been introduced by the government to encourage businesses to invest and assist the economy. By doing this, it helps to promote growth within the UK economy and gives businesses a potential boost.
Investing in Assets to Save on Corporation Tax
By making wise investments in assets at the correct time, you could save a significant amount of money on your corporation tax bill. It’s even possible, through prudent planning and intelligent financial advice, to wipe out your corporation tax bill entirely for a single business year.
Claiming capital allowances is possible when you buy assets which are used for your business. These can come in many forms and some of the most common examples of assets that can be deducted from business’ pre-tax profits are:
- Business vehicles – vans or lorries
- Plant equipment
In most cases you can deduct the full cost of these items from your profits before tax using Annual Investment Allowance (AIA). “The Annual Investment Allowance (AIA) provides businesses with 100% tax relief, in the year of purchase, for many business assets. Qualifying assets include plant and equipment, machines and tools, vans, lorries and diggers (although it does not apply to cars).”
The AIA has seen several changes since 2008 ranging from £25,000 all the way up to £500,000. However, the AIA amount has temporarily increased to £1 million between 1 January 2019 and 31 December 2020. This represents a huge opportunity for businesses to take advantage of these allowances. As a business you are going to need to plan and develop forecasts in order to make the best use of this highly advantageous situation.