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100% write down for qualifying capital expenditure

By P&A Knowledge Team • 17 August 2017 • Posted in Corporation Tax

The Annual Investment Allowance (AIA) limit has changed significantly over the last number of years. However, the limit has been fixed at £200,000 for all qualifying expenditure on or after 1 January 2016.

The current £200,000 limit is a generous allowance and will more than cover the annual capital expenditure spend of many small and medium sized businesses. There are transitional rules for businesses whose accounting periods span the operative date of any changes. If the basis AIA changed in the period for which a claim is being made the AIA must be time-apportioned accordingly.

The AIA was first introduced in 2008 and is designed to give 100% first year tax relief for qualifying expenditure on plant and machinery. It can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.

The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers.

Planning notes:

The AIA does not apply to cars. It is also unavailable in a final period of trading, prior to a business closing down.

Also, it is not necessary to claim the full relief available. This is particularly important for self-employed business owners who may find they lose all or part of their personal tax allowance if certain conditions apply.

Planning all aspects of significant capital expenditure is key and the tax consequences are just one aspect of the factors that will need to be considered. Please call if you need help looking at your capital investment options.

BPP holdings Supreme Court decision

By P&A Knowledge Team • 17 August 2017 • Posted in General

The Supreme Court has dismissed HMRC’s appeal in a long running case between the BPP Group of companies (who provide professional and academic education) and HMRC. The case initially centred on the VAT liability of supplies of books and education by BPP. BPP had a corporate restructure in 2006 and began to use one company to supply the books (BPP University College of Professional Studies Ltd) and another company (BPP University College of Professional Studies Ltd) to supply education. BPP argued there were two separate supplies, that of zero-rated books and standard-rated education. HMRC disagreed and argued that the supplies should be treated as one standard-rated supply and issued two VAT assessments. In May 2013, BPP appealed this decision to the First-Tier Tribunal.

What followed was a number of procedural delays by HMRC. HMRC applied for an extension of time, which BPP did not oppose. Disclosure was ordered for 17 December 2013 and HMRC provided it a few days late. A further deadline of 31 January 2014 was set for HMRC to provide information with the warning that if they failed to do so they faced being barred from taking further part in the proceedings. Whilst HMRC did serve a response on 31 January, BPP argued that the response did not provide the requested information and applied for an order barring HMRC from taking further part in the proceedings. This order was granted by the First-Tier Tribunal. HMRC appealed to the Upper Tribunal who reversed this decision. BPP then appealed to the Court of Appeal who restored the First-Tier Tribunals initial decision.

The Court of Appeal decision was appealed to the Supreme Court to make a final ruling. The Supreme Court agreed with the First-Tier Tribunal Judge that this decision involved two unpalatable choices. Making the debarring order, which she described as draconian, or not making the order, which, to use the vernacular, would have meant that HMRC effectively would have got away with it. In this case HMRC’s reticence in supplying information within the requested timeframe has meant the loss of an important case.

Planning note:

This case may have significant ramifications in other situations where HMRC is reticent in meeting deadlines set by the courts and we may see an increase in applications for barring orders.

Choosing a company name

By P&A Knowledge Team • 17 August 2017 • Posted in Corporate Governance & Regulation

Companies House guidance sets out the main requirements for incorporating a company in the UK. The guidance entitled Incorporation and Names also provides advice on checking which names are acceptable to Companies House when naming a company.

Choosing a company name can be one of the most important considerations for a new business. The name must meet certain legal requirements and at the same time be an effective marketing tool. One of the first steps after choosing a name is to check that it is actually available. Companies House offers a free WebCheck service which allows users to search 170 million digital records including company names for free. It is also important to check the Trade Marks Register to ensure that the proposed name does not infringe an existing trade mark.

There are also a number of restrictions set out in legislation. These restrictions include:

  1. The name of a private company limited by shares or guarantee must end with ‘limited’ or ‘Ltd’.
  2. The name of a public company must end with ‘public limited company’ or ‘p.l.c.’.
  3. Certain expressions and abbreviations which describe a particular form of company can only be used at the end of a name, such as ‘Limited Liability Partnership’ or ‘Community Interest Company’.
  4. A name that could suggest a connection with the UK government, a devolved administration, a local authority or a specified public authority.
  5. A name that includes sensitive words or expressions included in regulations.
  6. A name that includes words that would constitute an offence.
  7. An offensive name.
  8. A name which is the ‘same as’ an existing name on the index.
  9. The use of certain characters, signs, symbols and punctuation in a company name.

There are also limits for some sensitive words or expressions. For example, a word or expression that may cause criminal offence. This includes names that could be taken to cause criminal offence.

Planning note:

The above considerations apply to the registration of a new company. Existing companies may also want to use a trading name, and most of the above comments would also apply to its selection. However, there is no formal registrar of trading names and other options need to be considered. For example, it may be advisable to register a new company with the required trading name as its company name, in this way poaching of the name by competitors can be restricted. The new company does not have to trade, it is just a device to secure the name. And, as mentioned above, a search of the Trade Marks register may be prudent.

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