Corporate Tax & Capital Allowances

Corporation Tax

Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March. If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year. The profits limits are reduced for accounting periods of less than 12 months and for a company with associated companies1.

Year to 31.3.16:
Rate Profits band (£) Rate (%)
Main Any 20
Year to 31.3.15:
Rate 0 – 300,000 20
Marginal (small profits)2 300,001 – 1,500,000 21.25
Main Over 1,500,000 21

Note…

1. A company is an associated company of another company if one of the two has control of the other, or both are under the control of the same person or persons. A company may be an associated company no matter where it is resident for tax purposes.

2. Standard Rate Fraction: 1/400

Capital Allowances

Plant and Machinery

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However tax relief is available on certain capital expenditure in the form of capital allowances.

Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building ( integral features), computers, cars, vans and similar equipment used in a business.

There are special rules for cars and certain ‘environmentally friendly’ equipment.

Plant and machinery allowances may be available to owners of commercial property which is let out to a business.

The Annual Investment Allowances (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.

Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

Annual Investment Allowances

Special rules apply to accounting periods straddling the dates in the tables below.

The AIA may need to be shared between certain businesses under common ownership.

Company limits:
Expenditure incurred Annual limit (£)
1 January 2013 to 31 March 2014 250,000
1 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000
Sole trader and partnership limits:
Expenditure incurred Annual limit (£)
1 January 2013 to 5 April 2014 250,000
6 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the Main rate pool or the Special rate pool rather than each item being dealt with separately.

The annual rate of WDA is 18% in the main rate pool and 8% in the Special rate pool.

A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars, including expenditure incurred on new and unused zero emission goods vehicles.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.

AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify the car must be purchased new.

Acquired from April 2015:
Emissions (g/km) Pool Allowance
≤ 75 1 Main rate 100% FYA
≤ 130 Main rate 18% WDA
> 130 Special rate 8% WDA

Note …

1. Rate from 1 April 2015

Acquired from April 2013:
Rates apply for expenditure incurred on or after 6 April 2013 (1 April 2013 for companies).
Emissions (g/km) Pool Allowance
≤ 951 Main rate 100% FYA
≤ 130 Main rate 18% WDA
> 130 Special rate 8% WDA

Note …

1. Rate from 1 April 2013 to 31 March 2015

Acquired from April 2013:
Rates apply for expenditure incurred up to 5 April 2013 (31 March 2013 for companies).
Emissions (g/km) Pool Allowance
≤ 1101 Main rate 100% FYA
≤ 160 Main rate 18% WDA
> 160 Special rate 8% WDA

Note …

1. Rate up to 31 March 2013