Chancellor Offers Surprising SME Boost Says Stuart Rivers Associates Managing Partner, Stuart Rivers

Online, December 7, 2012 (Newswire.com) - So what does it mean? The first £250,000 from any capital expenditure i.e. construction works, property purchases, plant and machinery purchases will qualify for Capital Allowances. The taxpayer who incurs the expenditure receives 100% tax relief in the year of expenditure no matter whether that taxpayer is an individual or a company. For small businesses paying 20% tax this would mean a saving of £50,000 in one year but for the business owned by an individual who pays at the 45% tax rate from April 2013, it would mean a tax saving of £112,500 in that same year. Projects that may have been marginal when the AIA was £25,000 should now be re-appraised in the light of this additional tax relief.

Two examples based on the initial announcement but subject to any changes that may arise as further detail is provided are:

1. For the business paying the small companies 20% tax rate who extend their premises spending say £400,000 this could mean a tax saving of circa £20,000. If they then buy plant and equipment in the same year for £150,000 to use in those premises then they would have additional tax savings of £30,000 making a total tax saving of £50,000 from their investment.

2. A company builds and fits out new premises for £1,000,000 containing plant such as electrical systems, heating and toilets and this could generate £250,000 of Capital Allowance. If the company pays tax at the newly announced corporation tax rate of 21% then the company would benefit from a tax saving of £52,500 in the year they incur their expenditure. However, if for example the business is owned by an individual, partnership or LLP rather than a limited company or PLC, then the tax saving would increase to £112,500 (personal tax rate of 45%).

The AIA is applicable to all types of commercial businesses such as but not limited to hotels, shops, industrial units, offices, medical centres and care homes, and is not limited to type of owner.

Commenting on the announcement Stuart Rivers said: "This increase can only be seen as positive news for small and medium sized businesses and we look forward to getting to grips with the details of the changes over the next few days."

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For further press information please contact: Lucy Carey, Litmus Public Relations, t. 0113-2424362, e. [email protected]