The headlines can make it feel as though hanging on for dear life is the only thing left to do in this economy. However, the same economic cycle that's brought us to this point can bring up some useful opportunities for those that spot them.
Some planning now can put you in the best position to take advantage of these possibilities, and perhaps help while hanging on now.
Getting HM Revenue & Customs (HMRC) to fund part of your purchases
Capital expenditure has been cut back across the board. Sometimes you don't have a choice – critical equipment does not respect the economy and things simply break down or wear out.
Perhaps you are in a position to make careful investment in new technology in a market that is producing increasingly attractive deals for those that have funds to buy.
Whatever the reason for the purchase, HMRC may be prepared to contribute towards the cost: either by allowing a full write-off of the cost against tax, cutting the cost by 21-28%, or – in a couple of cases – by giving you money back for making the investment.
Cutting the cost
The Government has been steadily expanding the range of assets whichl qualify for 100% capital allowances in the year of purchase. Capital allowances are the tax form of depreciation in the accounts. It normally takes 20 years before a business recovers the cost of a purchase through capital allowances. The 100% capital allowances accelerate that substantially, to enable a business to recover the entire cost in the year of purchase: an effective discount of up to 28% for tax paying companies.
The assets that qualify for this include:
- energy-saving equipment: such as lighting, insulation, boilers, refrigeration, combined heat and power, heat pumps, solar thermal systems, ventilation and air conditioning. Not all equipment automatically qualifies - it should have a 'certificate of energy certificate' from the Government;
- low CO2 cars: these are cars which are solely electrically powered (such as the G-Wiz, not hybrids like the Prius) or cars which have a 'EC certificate of conformity' or a 'UK approval certificate' which shows carbon dioxide emissions of less than 110 grams per kilometre driven;
- environmentally beneficial equipment: as with energy-saving equipment, particularly water-related, this covers equipment specifically approved by the Government, and includes efficient toilets, efficient taps, rainwater harvesting equipment, and water reuse systems (amongst others);
- research and development (R&D): equipment used in carrying out qualifying R&D – including the cost of building the physical premises on which the R&D is carried out (but not the cost of the land on which the premises are built)
- business premises renovation: for those who are taking the opportunity now to negotiate a good deal with a contractor, the costs of converting or renovating certain buildings in disadvantages areas into business premises.
Cashback from HMRC
In two cases, HMRC will actually pay back money to loss-making small and medium-sized companies (SMEs) which incur costs in two areas: on R&D, and on energy-saving or environmentally-beneficial equipment.
SMEs are companies with fewer than 250 employees and less than €50 million in turnover or less than €86 million in gross assets (taking any group companies into account).
For R&D, expenditure on staff costs, materials and subcontractor will qualify, and the company can get up 24.5% of that expenditure back from HMRC.
For energy-saving or environmentally-beneficial equipment, a company can get back up to 19% of the cost of the equipment back from HMRC.
Read the team's first action note on introducing, or expanding, share-based incentives for employees.