There are significant changes to the tax treatment of expenditure on new fixed assets, which will come into force from April 2008. The majority of the current regime will be abolished and in its place each business will obtain 100% tax relief on up to £50,000 per year of new capital expenditure. There are additional rules in the case of groups and more than one business with similar ownership.

For businesses that spend over £50,000 p.a. other tax allowances will include the following:

• 100% on all environmentally beneficial equipment 
• 10% p.a. on long life assets 
• 10% p.a. on ‘integral features’ of buildings and structures such as air conditioning,
  lighting and heating systems. 
• A reduced allowance of 20% p.a. on most other qualifying expenditure

It is therefore increasingly important to be able to identify all elements of expenditure to ensure that the £50,000 Annual Investment Allowance is allocated most beneficially.

In the case of new building projects, taking account of tax considerations at the planning and specifications stage can now generate significant savings in an increasingly complex area of taxation.

When budgeting for forthcoming expenditure you should ensure that it is spread most advantageously over approaching tax years.