ONE of the most striking pro-business announcements in last week’s Autumn Statement was the increase in the tax relief afforded to company investment in plant and machinery equipment. A miserly allowance of £25,000 jumped ten-fold to a healthier £250,000.
Aimed at smallish businesses, it’s meant to unlock cash for investment. But it comes with some provisos. Any business interested in using the relief should consider the details before splurging their capital.
Firstly, what is “plant and machinery”? The term suggests industrial cleaners or dirty chemical vats, but the definition is actually fairly broad. Debbie Griffiths, entrepreneurial business partner at Deloitte, says it covers “most fixed asset additions.” Reassuringly for tech companies, it includes computer equipment and some software programmes, so you don’t need to be a small-scale manufacturer to take part. There are exceptions, however. You can’t claim back the cost of a company car, for instance.
This links through to a second word of caution. This is obviously a break from taxation rather than a cash transfer. The £250,000 figure is the money a company can offset from its corporation tax bill, so a business must be profitable before it can be used. “If you’re making losses anyway, this isn’t going to be a policy to help your business grow,” says Griffiths.” You’ve also got to buy the equipment first. So factor in the costs of financing if you don’t have the cash sitting in your bank account.
Plant and machinery relief may be enough to persuade more forward-thinking and better capitalised businesses to accelerate their capital investments, but it won’t pick a struggling firm off the floor.
Even if this particular measure won’t prove useful, however, the Autumn Statement might have something else for you. Fuel duty has been frozen, of course, so at least the cost of travel won’t become more expensive. And better, tapered small business rates relief has been extended until 2014 – hopefully giving your business a little more room to breathe.