The Annual Investment Allowance (AIA) can be a huge benefit to businesses and working with Credo can further help you benefit from the allowance.
The AIA is a form of tax relief for British businesses related to the purchase of business equipment. It allows a business to deduct an amount of capital expenditure up to a certain limit from its taxable profits in a given tax year.
One such customer who has cleverly taken advantage of this tax benefit, with the support of Credo, is an East Anglian construction specialist, who was considering buying a new excavator.
Their accountant had advised that they were projecting year end taxable profits of £130k. The accountant advised investing in capital equipment to reduce this figure. The director of the business decided to purchase two £60k excavators. Although this removed the problem of taxable profits, it didn’t ease cashflow.
Credo stepped in to provide a swift solution, just one week before the clients end of year. Funding was put in place on a VAT only, 5-year Hire Purchase, spread across two lenders to maintain competitive rates of funding. This allowed the client to –
- Reduce any cashflow pressure with VAT only as a deposit
- Realise the purchases in his 2019-year end accounts and benefitting from the AIA
- Reduce taxable profits from around £130k to just £10k
- Repay the HP agreements at an affordable monthly payment equivalent to that of the previous short-term hire costs
It’s a huge tax win for another local company – what could we do for you? Call us on 01603 703180 to see how we can help!