TT33: Information & Communication Reliefs

Small companies can claim 100% tax relief on ICT until 31st March only!

The Finance Act 2000 introduced a generous 100% tax write-down known as a “first year allowance” for small businesses investing in information and communications technology (ICT). This allowance was planned to be in force for a limited period, which began on 1st April 2000 and is set to end on 31st March 2003. The Chancellor may extend this relief for a further period but there is no certainty of this!
Qualifying equipment

A wide range of ICT equipment qualifies for relief, broadly categorised as follows:

Class A – computers and associated equipment:Class B – other qualifying equipment:Class C – software:
all computers including small palmtop organisers and personal computerswireless application protocol (WAP) phonesall software for use with computers or high-tech communications technologies and the costs of creating websites, including new software for existing (pre-1st April 2000) computers
computer peripherals, including keyboards, printers, scanners, etcset-top boxes connected to televisions which can receive and transmit information to data networks such as the Internet
cabling etc, linking computers to each otherequipment with similar application.
data networks, such as the Internetmobile phones (3G only)>
dedicated electrical systems for computers

Qualifying companies

Only companies that qualify as “small” for the financial year in which the ICT expenditure is incurred qualify for the 100% tax allowance. A company is small if it satisfies any two of the following three conditions for the current or previous financial year:

  • turnover not more than £2.8 million;
  • a balance sheet asset total of not more than £1.4 million;
  • not more than 50 employees.

A small company will not qualify if it is a member of a large or mediumsize group.

Barnes Roffe Topical Tips

  • Consider advancing your investment in ICT so that relief can be claimed before 31st March 2003.
  • You do not have to pay immediately. As a general rule capital expenditure is treated as being incurred for allowance purposes when there is an “unconditional obligation to pay for it” even though it may not be required to be paid until a later date!
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