Kinder Pocock - 2007/08 Tax Planning
Sharon Pocock of Chartered Certified Accountants Kinder Pocock discusses the best times to buy and sell business assets that may provide a little extra help for when the dreaded tax bill arrives...

THINKING ABOUT BUYING ASSETS FOR YOUR BUSINESS?

It’s all in the timing for the greatest tax benefits……

Tax allowances on business assets:
Business assets (vans; computers; machinery; equipment etc) attract capital allowances which can reduce your taxable profits, and hence reduce your tax bill.
In the tax year that you buy your asset, you can deduct 50% capital allowances from your taxable profits for that tax year. In later tax years you can deduct capital allowances of 25% of the net cost of the asset, from your profits.

When to buy?
If you buy your asset before 5 April 2008, you could attract 50% allowances in 2007/2008 (the current tax year). But if you buy your asset after 6 April 2008, this asset will only attract 50% allowances in the 2008/2009 tax year (the following tax year). Clearly, by purchasing your asset before 5 April 2008, you will get your 50% allowances a whole tax year earlier than if you’d waited another day.

When to sell?
You don’t get any capital allowances for the tax year in which you sell an asset. So, if you sold your asset before 5 April 2008, you would lose your capital allowances on the sold asset for 2007/2008. However, if you sold your asset on or after 6 April 2008, you would have the benefit of full tax allowances for 2007/2008 (this tax year), but none in 2008/2009 (next tax year).

Buying and Selling?
To gain the greatest tax benefit, you may consider buying your asset before 5 April 2008, but delaying the sale of your old asset until 6 April 2008, or later. Thereby you would receive 50% allowances on the new asset, plus 25% allowances on the old asset in the same tax year.

The tax benefits suggested are simplified and would depend on the profits made during the tax year. For more detailed advice/ information please contact: sharon@kinderpocock.co.uk

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