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Capital allowances

To offset some of the benefit of the reductions in corporation tax rates, the rate at which capital allowances are given will be reduced from April 2012.

  • The rate of writing down allowance for the main pool will fall from 20% to 18%, and that for the “special rate” pool from 10% to 8%.
  • The maximum amount of expenditure on which a business can receive full relief in the year it incurs the expense (the annual investment allowance) is to be reduced from £100,000 to £25,000.

The delay in introducing the changes to capital allowances is welcome and should permit clients to plan their capital expenditure accordingly. In particular smaller companies will need to carefully budget for the impact of the reduction in the maximum amount eligible for the 100% annual investment allowance.

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