Property capital allowance is the expenditure amount likely to be claimed against the taxable profit for an asset under the Acts that regulate it. Property that has been purchased to be used in a given business are the ones that can claim for property capital allowance. Partial or full claim can be done on the property depending on the classification of the given property. 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. Once the total amount has been calculated, it should 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. The cost incurred during research and development, renovations of the premises for doing business as well as patents also allows a person to claim for capital allowance. One is not required to claim for capital allowance from some asset including those items that have been leased, structures, buildings, land as well as other items used for purposes of entertainment such as music systems and boats. When claiming for property capital allowance, part of the value of the items or all of it can be deducted from the profits that the business has achieved in the year before paying the taxes.
Annual investment allowance, the writing down allowance and the first-year allowance are some of the various types of capital allowance. In the annual investment allowance, the business is required to deduct the full value of the given item that is used entirely for the purposes of the business which can be as high as the limit of the capital allowance. Deduction of annual investment allowance is usually claimed during the similar taxation year period and when the item was acquired. Writing down allowance is where the business is able to deduct a given amount of the total value of the property from their profits each year. First year allowance also known as enhanced capital allowance is where capital allowance deduction is only made during the year when the item was purchased. Items that is water or energy efficient such as cars whose carbon emission is low and water and energy saving devices are the only ones which one can claim for the first-year allowance.
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 in returns enhances business growth as the money can be reinvested to the business.