Pacepacker tells £500k plant equipment tax relief secret

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As specialists in automation packing, processing and palletising equipment, Pacepacker Services knows its fair share about boosting production efficiency. But when it comes to tax, it was their accountants that recently alerted them to a £500K tax relief incentive on plant equipment (including packing automation systems).

Pacepacker tells £500k plant equipment tax relief secretHaving recently learned of a government HMRC incentive which benefits businesses investing in up to half a million pounds in plant and machinery until the end of 2015, Pacepacker ran a quick customer poll to gauge awareness. Asking customers if they were aware of this Annual Investment Allowance, which is subject to 100 per cent corporate income tax relief on qualifying plant and equipment, 90 per cent of those polled responded ‘NO’, with the majority wanting to know more!

Dennis Allison, Pacepacker’s Managing Director, says: “To be frank, until our accountants put this on our business radar, this tax relief incentive wasn’t something that we were aware of either – like a best kept secret!” The annual investment allowance, known as AIA, has been increased in stages in the last few years. From 1 April 2014, it was increased by HMRC from £250,000 to £500,000. The original limit was £25,000, and this is what it could revert back to on 1 January 2016, although tax pundits say it could be higher and may be reviewed by the Chancellor in his autumn statement.

With confidence in UK manufacturing and the wider economy continuing to build, missing out on this tax incentive could be a significant financial oversight, especially for companies that are looking to make big investments in new machinery in the next few years. Dennis emphasises: “We are by no means financial experts. But for any customer considering investing in plant, we are flagging this incentive and suggesting they speak urgently to their accountant or financial adviser so that they can make an informed investment decision.”

Although this end-of-year date seems a long way off, Pacepacker’s accountants and tax advisors, Bird Luckin, also suggests that anyone investing in automation equipment starts taking steps sooner rather than later. Senior Manager Paul Forster flags three key points to consider:

  1. If the purchaser’s year-end straddles 31 December 2015, the AIA limits are apportioned. For example, a company with a year-end of 31 March 2016 would be able to claim AIA of 9/12ths of £500,000 plus 3/12ths of £25,000. Care should be taken, as a purchase on or after 1 January 2016 would be restricted to 3/12ths of £25,000
  2. i.e. £6250. If purchasing on or before 31 December 2015, AIA of £381,250 would be available. The Chancellor stated in the budget that he will revisit the proposed reduction to £25,000 from 1 January 2016 in his autumn statement, but did not hint as to what the amount may be. Any announcement in the autumn would not give businesses much time to plan to acquire plant before 31 December 2015.
  3. Timing – Pacepacker’s equipment is built to order, can take several months to manufacture and deliver, and generally the equipment is bought with staged payments. A purchaser should factor this in when buying, as if instalments straddle the company’s year-end or 31 December 2015, it could have an impact upon the claim for AIA.

A group of companies or individual companies under common control can claim up to £500,000 collectively per annum. This means the company/group only gets one £500,000 allowance in the year for all eligible assets, which includes vans, trucks, harvesters and tractors, in addition to plant, equipment and computers. So, if you were a group comprising both a transport company and a packing company, or a farm and contract packer, you would need to examine how much AIA has been used within other group companies to determine how much would be available for additional purchases.

While holding these tax talks also look into regional grants and incentives, suggests Dennis. He says: “These tend to be regional and specific to a certain business sectors and are designed to attract or retain investment in individual counties. For example New Anglia LEP (Norfolk and Suffolk) currently offers a grant for plant. Other counties offer regional growth funds, or LEP grants. All of these are things that your appointed accountant and tax specialist should be able to clear up!”

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