Tax and financial planning for the purchase of equipment

Investing in more expensive, quality equipment rather than purchasing cheaper equipment that requires regular repairs, is not a new theory, but one that is still not fully embraced by companies working in the construction industry. In the long run the cheaper equipment can end up costing companies more money and inconvenience, in terms of unplanned repair costs and in the delays that faulty or broken machinery can cause.

There can be various reasons why companies choose not to purchase more expensive equipment, whether that be dependent on the length of time that the equipment is to be used or perhaps the cost involved with the initial financial investment. In the latter case, where funds are not readily available, options such as Hire Purchase or Bank funding can be considered. Securing funding can involve producing and providing intermediaries with various financial information, which companies often don’t have the time to do when their main focus is on the operational aspect of the business. Our team at EQ is experienced in assisting clients with preparing cashflow forecasts, financial projections, and liaising with our contacts at local banks to help secure short or longer term financing arrangements for our clients.

Planning ahead for the timing of when equipment should be purchased is also important from a tax perspective. Purchases of equipment can have a significant impact on your overall tax liability, and how soon you receive the relief for these. When purchasing plant equipment, full relief through capital allowances can be given in the year of purchase, up to an amount of £200,000, the deduction is then calculated at 18% thereafter. If you have some flexibility with the timing of purchasing new equipment it is advisable to discuss this with your accountant or tax advisor.

Our EQ Property & Construction team can advise you on capital allowance and assist with any financial or tax planning requirements.  Get in contact via info@eqaccountants.co.uk or speak with your local office contact.