Tax & Accounting News

Paying For New Equipment At The Right Time

29/10/2009

Most business owners will be aware of the need to claim Capital Allowances (CAs) – which can be used to offset the cost of new equipment against tax.

Companies can claim CAs on the cost of equipment as soon is it has an ‘unconditional obligation’ to pay for it. If a company’s year-end is approaching, it may be in their interest to ensure payment is made, and therefore CAs claimed, as soon as possible.

With off-the-shelf items such as computers, there is no real problem in claiming CAs at the time the paperwork is signed, provided the purchaser is obliged to pay in full within four months of committing to the paperwork. However, some purchase contracts link payment to the delivery of the goods, meaning the date for claiming CAs must correspond with when the goods are delivered – potentially delaying any claim.

It may be possible to agree with the supplier on revised terms and conditions, obliging the purchaser pay by a certain point, irrespective of delivery date. This would revert the date for claiming CAs to the date the goods were ordered. Alternatively, a business owner could look to pay for the goods in advance or bring forward the delivery dates, to ensure CAs can be claimed before the year-end.

For more information or advice please contact us.