Capital allowance rate doubled to 40%

Chancellor Alistair Darling has reportedly given a boost to businesses investing in HGVs or LGVs and other new equipment, by doubling the capital allowance rate from 20% to 40% – at least for the tax year 2009-2010. There is no limit on the 40% capital allowance and the 100% Annual Investment Allowance (AIA) is to remain in place.

But what is more, according to Chief Economist at the Freight Transport Association, Simon Chapman, for a HGV or LGV driving firm spending a total of nearly £150,000 on either HGVs or LGVs and yet being taxed at the small companies’ corporation tax rate of 21%, it appears that the overall change would be worth an additional £4,200.

Nonetheless, if HGV or LGV driving firms and companies were being taxed at the regular 28% rate of corporation tax, still – it would be worth £5,600. In addition to this, the FTA’s Simon Chapman notes that operators and hauliers must act wisely if they want “to overcome” the tax. He advises HGV and LGV companies to react in the right way.

For that matter, Chapman adds:

“What this means is that operators have an incentive to invest in new HGVs or LGVs after October, when Euro-5 becomes mandatory and the existing RPC [Reduction Pollution Certificate] is lost. I do believe that UK-based HGV and LGV driving or distribution companies can in fact benefit a lot from this.”