The Advancing of expenditure
If the expenditure is incurred before the company’s accounts year end, it can reduce the current year’s tax liability.
There are many situations where significant expenditure is planned for early in the next accounting year. If you bring forward this expenditure by just a few weeks to fall within the current year, the related tax relief is received 12 months early.
Below are some examples of the type of expenditure to consider bringing forward:
- building repairs and redecorating
- advertising and marketing campaigns
- redundancy and closure costs
Please note that payments into company pension schemes are only allowable for tax purposes when the payments are made. And not when they are charged in the company’s accounts.
You should consider the timing of capital expenditure on which capital allowances are available to obtain the maximum reliefs.
Companies are able to claim an annual investment allowance which provides 100% relief on expenditure on plant and machinery, excluding cars. The amount of AIA available for a particular accounting period varies depending on the accounting period.
|Periods from||Annual limit|
|1 April 2014||£500,000|
|1 January 2016||£200,000|
There are special rules where accounting periods straddle one of the above dates.
Groups of companies have to share the same allowance. The expenditure on qualifying plant and machinery which is in excess of the AIA is eligible for writing down allowance (WDA) of 18%. Where the capital expenditure is incurred on integral features the WDA is 8%. Additionally, there are 100% allowances on designated energy saving technologies. Other limited allowances are also available for investments in certain types of building.
There are three main options for companies to consider in utilising the trading losses:
- they can be set against any other income (e.g. bank interest) or capital gains arising in the current year
- they can be carried forward and set against trading profits arising in future years
- they can be carried back for up to one year and set against total profits.
At Adiva Accountants in Canary Wharf, we can provide tax planning advice for your company in Canary Wharf, Bromley, Kent and London areas. For further advice on tax savings for companies, please do not hesitate to contact us at Adiva Accountants in Canary Wharf.