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Benefits of Property Capital Allowance

The expenditure amount likely to be claimed against the taxable profit for an asset and it is usually regulated by Acts of law that have been put in place in a given region. The property allowance can only be claimed on property purchased for use in a business but not those that have been gifted into the business. 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. Submission of the total amount calculated should be done when the business is filling their tax returns so that it can be forwarded to the responsible bodies to act on the claim.

Some of the assets one can claim for capital allowance includes machinery, equipment, vehicles such as vans, trucks and cars . 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. 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.

The different types of capital allowance includes annual investment allowance, the writing down allowance and the first-year allowance. Annual investment allowance is where a business can 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. The deduction of the annual investment allowance can be done in the similar taxation year period and when the item was acquired. When a business can deduct a given amount of the total value of the property from their profits each year, it is known as writing down allowance. First-year allowance or enhanced capital allowance is where the deduction is only made during the year when the item in question was purchased. The items that one can claim for the first-year allowance includes those 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.

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