Capital allowances are treated as part of a trading loss for loss relief purposes, and so care should be taken to determine whether disclaiming these and shrinking the loss may actually leave you better off.
This is because personal allowances are ignored in loss claims, so a loss carried back could be wasted if it is set against income that is already covered by personal allowances.
Example:
Arthur is self-employed and makes a loss for the current year of £25,000 including capital allowances of £5,000.
His taxable profit for the previous tax year was £30,000.
He carries the loss back against the profits of the previous year.
By disclaiming the capital allowances this year he will have more capital allowances available in future years. By reducing the loss carried back, he also preserves the personal allowance in the previous year.
This means that he will save a considerable amount of tax in future years.
Similar logic can be applied in deciding whether to claim the annual investment allowance, or whether this would be wasted and it would be more beneficial to claim the writing down allowance instead.
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