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Busy Practitioner by Mark McLaughlin ATII TEP

Topical information on capital allowances plus some key tax dates are outlined by Mark McLaughlin ATII ATT TEP

Capital allowances

The recent Pre-Budget Report outlined increases in the thresholds for 'small or medium-sized' enterprises (as defined in Companies Act 1985, s 249). The higher thresholds apply for accounting periods ending on or after the date regulations enter into force giving effect to the increases. Under the new rules, the criteria for determining whether a company is small or medium sized is based on the following:

	Small	Medium
Turnover (not more than)	£5.6 million	£22.8 million
Balance sheet total (not more than)	£2.8 million	£11.4 million
Number of employees (not more than)	50	250

Fewer companies will require an audit following the new regulations.

For capital allowances purposes, small or medium-sized 'enterprises' (widely defined to include companies, sole traders and partnerships) are eligible for 40% first year capital allowances for qualifying expenditure on plant and machinery (CAA 2001, s 44), and more businesses will become eligible following the threshold increases. Small enterprises only are eligible for 100% first year allowances for expenditure on qualifying information and communications technology, although this enhanced allowance ceases to be available after 31 March 2004 (CAA 2001, s 45).

Key dates

31 January 2004

• The 2003 self-assessment returns of persons other than companies must generally be filed on or before this date. However, for returns issued after 31 October 2003, the filing deadline is extended to within three months from the issue date (TMA 1970, s 8(1A)(b)).
  
  
• Any balancing payment of income tax (and Class 4 National Insurance contributions, if applicable) for 2002/03 must generally be paid by 31 January 2004, together with any capital gains tax due for 2002/03. However, for 2003 tax returns issued after 31 October 2003 (if the taxpayer notified chargeability by 5 October 2003), the payment date is extended to within three months from the return’s issue date (TMA 1970, s 59B(3)). If payments on account of income tax and Class 4 contributions for 2003/04 are appropriate, the first interim payment is also due and payable by 31 January 2004 (TMA 1970, s 59A(2)(a)).
  
  
• Personal pension contributions can be carried back and treated as paid in 2002/03, if a claim is made by 31 January 2004. The claim must be made at or before the time of payment (TA 1988, s 641A(1)). A claim for retirement annuity premiums paid in 2002/03 to be carried back and treated as paid in 2001/02 (or 2000/01, if there are no net relevant earnings in that preceding year) must also be made no later than 31 January 2004 (TA 1988, s 619(4)).
  
  
• Charitable donations paid since 6 April 2003 and qualifying for relief under gift aid may be carried back and treated as paid in 2002/03. An election to this effect must be made to the Inland Revenue by the date on which the donor’s tax return is submitted (in practice the claim will normally be made by entering the relevant figure in box 15A.3 of the self-assessment return for 2003), and in any event no later than 31 January 2004 (FA 2002, s 98).
  
  
• Applications for refunds of Class 2 National Insurance contributions properly paid in 2002/03 (i.e. where the self-employed taxpayer’s actual earnings fell below the small earnings exception limit of £4,025 for that year) should be made no later than 31 January 2004 (Regulations SI 2001/1004, Regulation 47(2)).