In the past, this has been written off against profits over a series of years. This allowance should cover most items of plant and machinery purchased by smaller businesses. But, cars will not be included in the total. If a business spends more than £50,000 in one year the excess will be written off against profits at a rate of 20% each year.
The current rate is 25% a year. Limited companies will be able to claim 50% of first year allowances on equipment purchased before 1 April 2008. Unincorporated businesses will have until 6 April.
Where equipment is integrated into a company building then 25% of the reducing costs per year is set against profits. This will reduce to 10% from 2008.
Capital allowances available for the cost of industrial and agriculture buildings will be hit severely.
They will reduce on a sliding scale of 1% a year from the current 4% 2007 to 1% in April 2010. No allowances will be due for the majority of buildings from April 2011. However balancing adjustments ceased after 21 March 2007, meaning no repayments on disposals.