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Capital Expenditure 'write down'
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what does this actually mean? I know its 50% this tax year but changing to 100% 2008-09. But how does that affect the tax one would pay?
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It means that you can charge 50% of the cost of ASSETS bought for the business as an expense cost against the business in the year that the asset is purchased.
I assume you know that normally assets are part of the working capital of the business, and hence are part of the value of the business.
Otherwise each year they would normally be depreciated, typically by 20% of their original cost each year. The capital allowance system works instead of conventional depreciation policies.
The impact is that the pre-tax profit is lower (because the expenses are higher) so less tax is paid.
In my business I've decided not to 'take' the capital allowances, and stick with conventional depreciation - with Alistair putting up the small business tax rate from 19% to 20%, I'd rather pay more tax at 19% on larger profits this year, then 20% tax on less profits next year.
I assume you know that normally assets are part of the working capital of the business, and hence are part of the value of the business.
Otherwise each year they would normally be depreciated, typically by 20% of their original cost each year. The capital allowance system works instead of conventional depreciation policies.
The impact is that the pre-tax profit is lower (because the expenses are higher) so less tax is paid.
In my business I've decided not to 'take' the capital allowances, and stick with conventional depreciation - with Alistair putting up the small business tax rate from 19% to 20%, I'd rather pay more tax at 19% on larger profits this year, then 20% tax on less profits next year.
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