For many businesses, tax season is one of the most dreaded times of the year. After all, there aren’t many cases where companies actually get a return from the IRS after shelling out capital throughout the fiscal period. At least there are a few things that can help company owners like yourself catch a break such as an AIA allowance.
There’s just one problem: you forgot to claim your wares.
Does that mean it’s too late to reap any benefits? Of course not. In fact, you can use a writing down allowance instead to help you recoup any business losses you may have suffered through purchases for your property. How exactly does this work? You’ll get the answers you need in this article!
What Is a Writing Down Allowance?
And AIA allowance can offer some good deals, but so does the writing down allowance. This allowance offers a reduction in the taxable income of a business or corporation based on the assets that were acquired within the year.
As the business owner, you have a right to make a claim against certain assets in your company that falls under equipment, machinery, or business vehicles, all of which are collectively known as “plant and machinery”. Any equipment that you purchased within the tax year can be added to the allowance, but keep in mind that anything that’s rented or leased doesn’t qualify and must be written off as expenses instead.
How to Calculate Your Allowance
Thankfully, calculating your writing down allowance isn’t difficult to achieve. To do so, you need to add the percentage of the value of the assets purchased in this current year to the depreciation on company assets you purchased in the past year.
The normal percentage of capital allowance is 18% or a special pool writing down allowance of 6%. After knowing your allowance option, you’ll need to multiply that percentage by the total amount you spent on your company purchases.
When finding the depreciation value of last year’s assets, there are several ways the percentage can be calculated. The most common would be straight-line depreciation, which splits the value of the asset evenly throughout the duration of its useful life. Another option is the units of production depreciation, which is calculated based on how much work (and therefore, how much wear and tear) a specific piece of equipment has done and/or will do.
Now that you know what a writing down allowance is and how it’s done, you’ll want to make sure you talk to an accredited provider about capital allowances so you know how to file correctly. Make sure to get your tax returns amended today!
For the Information You Deserve
Now that you’ve got an understanding of what a writing down allowance is, you can expect to see a return for your business in no time. Our site has plenty more to offer you so you can learn how to navigate your life and reach your next level of success. Check us out and see what you find!