There are various regulations that have the power to allow for property capital allowance which is the expenditure amount likely to be claimed against the taxable profit for a given asset. Property that has been purchased to be used in a given business are the ones that can claim for property capital allowance. It depends on the classification of the property so as to determine whether a full or a partial claim can be done. During making claims for the property capital allowance, a business needs to calculate the total amount of the allowance to be claimed in a given taxation period. The amount determined should then be submitted when the business is filling information during tax returns so that it can be forwarded to the responsible bodies to act on the claim.
Machinery, equipment, vehicles such as vans, trucks, and cars are some of the properties one is likely to claim for property capital allowance. Property capital allowance can also be provided for the cost incurred during research and development, renovations of the premises for doing business as well as patents. There are some properties that cannot be claimed as a capital allowance such as items that have been leased, structures, buildings, land as well as other items used for purposes of entertainment such as music systems and boats. In the property that are likely to claim capital allowance, part of the value for the items or all of it is usually deducted from the profits made by the business before payment of taxes.
Annual investment allowance, the writing down allowance and the first-year allowance are some of the various types of capital allowance. The full value of the asset used entirely for the purposes of the business which can be as high as the limit of the capital allowance can be deducted in the annual investment plan. During the same year that the item was acquired, annual investment allowance can be deducted from the tax in the same taxation period. In writing down allowance, a business deducts a given amount of the total value of the property from their profits each year. First-year allowance or enhanced capital allowance is where the deduction is only made during the year when the item in question was purchased. Most items that can be claimed for the first-year allowance are those properties that are water or energy efficient such as cars whose carbon emission is low and water and energy saving devices.
The main benefit of property capital allowance is that tax charged to a business is reduced which includes the amount of money spent in purchasing the property in question. This will enable the business to retain more cash which leads to enhanced growth of the business since the money in most cases can be re-invested in the business.