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Business strategies: Tax efficient methods of purchasing assets

Shared from Tax Insider: Business strategies: Tax efficient methods of purchasing assets
By Jennifer Adams, December 2023

Jennifer Adams considers different methods and tax implications of asset purchases by businesses. 

When businesses purchase assets, they invariably use some form of finance on the pretext that it is better to conserve cash, because once it's gone – it's gone!  

Different methods have different tax implications depending on the type of asset involved, contract entered into, and whether the business calculates its profits on a cash or accruals basis. Capital expenditure is not usually deducted in calculating taxable profits; capital allowances are claimed instead. The exception is where accounts are prepared using the cash basis, when relief is given against profits unless the asset is of a type that is specifically disallowed (e.g., cars). Where accounts are prepared using the accruals basis, a deduction is not given for capital expenditure as such but under the capital allowances (CAs) regime instead. 


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