Benefit from Increased Capital Allowances

IT expenditure encouraged by increased Capital Allowances

In the Chancellor of the Exchequer’s recent Budget statement increased Capital Allowances (CAs) were announced, uplifting rates from the existing 20% to 40% in the first year.

This is a government tax incentive to encourage companies to invest in Plant & Machinery (which includes IT hardware and software), in the current tax year. This means 40% of the value of any IT spend can be offset against profit before tax (assuming liability for Corporation Tax), thus gaining a reduction in Corporation Tax liability, where applicable. In future years the CA benefit is 20% of the reducing balance, i.e. 20% of the remaining unclaimed percentage of asset cost.

Take this worked example, for a £100,000 IT spend: In Year 1 this would attract 40% CAs. Hence profit before tax is reduced by £40,000 for the tax calculation. This results in a reduction of Corporation Tax (assuming 28% rate) liability of £ II ,200 for the current tax year. As a comparison, if the investment is delayed until the 2010-2011 tax year, the CA benefit would be halved, i.e. £5,600.

Exel Computer Systems

Exel Computer Systems is the UK Owner and Author of EFACS E/8, a flexible and fully integrated ERP solution. EFACS E/8 is browser, XML and Java based and operates on a wide range of servers, operating systems and databases, with multi-language and multi-currency capabilities.

EFACS E/8 incorporates all the major functions of ERP, with a range of fully integrated add-on modules available including, Document Management, CRM, Workflow, Business Intelligence, Product Configuration, Mobile and Touchscreen Applications and many more.