Coronavirus – Using Tax Incentives to Help Your Cashflow

It is always important to take every tax break available to you as a business, corporately or personally, and never more so than now.  Capital Allowances is a term unfamiliar to many, yet it enables tax paying businesses to both claim historic expenditure and reduce tax payable now or even receive a tax refund.

Reducing tax bills is a simple way to keep cash within a business and maximising the relief available to you through Capital Allowances is a way to do this, indeed HMRC are of the opinion that everyone entitled to claim a capital allowance will do so as they see no reason why one would not claim a relief available by statute.   

Companies with profits less than £1.5 million pay corporation tax nine months and one day after the end of their accounting period.  Companies with accounting periods of 31st July 2019 will soon be facing imminent tax liabilities on 1st May 2020. Individuals and partnership care home owners will have made payments on account on 31 January and then due again on 31 July, so this payment will be due soon.

Jex Capital Allowances specialise in this field of tax relief and providing your business / individual still owns the assets, we are able to review acquisitions and expenditure incurred and establish if capital allowances can be claimed and if you can reclaim tax paid or reduce your future on account payments.

Example – Individual Income Tax Payer @ 45% Additional Tax Rate

For example, an Individual / Partnership Care Home Owner paying income tax at 45%, carried out a refurbishment of the home in 2016 and incurred a cost of £500k on assets qualifying for plant and machinery allowances.  These assets could include heating & ventilations systems, electric systems, lifts, sanitary wear, etc. 

Assuming that the Care Home Owner has never made a claim and still owns the assets, under the Capital Allowance Act, the Care Home Owner is still entitled to make a claim and amend a tax return that is still open. 

In this example, the Care Home Owner’s tax saved over time will equate to £225K (£500k x 45%).  The graph below shows how the tax saving is achieved over 10 years. 

To gain benefit of initial cashflow and a reduction of upcoming tax liabilities you can amend a prior year tax return the owner will be able to receive a tax rebate from HMRC equal to the allowances in that period and going forward reduce the tax payable to HMRC.

Historic capital allowance claims can be made on any relevant qualifying expenditure, subject to previous claims, JexCA will undertake such due diligence to identify qualifying expenditure.  Historic capital allowance claims may not qualify for Annual Investment Allowances if the expenditure was not incurred in the year the tax return is amended.

If you would like independent and professional advice on how maximising Capital Allowances can benefit your business in these uncertain times, please contact Jonathan Jex on or Stephen Metheringham on or call 0845 345 4964.

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