AdvertisementIn the year of purchase, the relief is a ‘first year allowance', which for acquisitions in the period 1 April 2006 to 31 March 2007 is 50% of the cost. For the previous year it was 40 per cent.

It is important to check these rates if you are doing your own tax as they vary frequently. After the first year, you get a ‘writing down allowance' of 25 per cent a year on the balance of the cost.

This will mean that you get tax relief for the full cost of the item much more quickly in the event that you sell or scrap it within that period – ask your Chartered Accountant or HM Revenue & Customs for further details.

If this is above the National Insurance lower earnings threshold (£4,368), but below the level of the income tax personal allowance (£5,035), this has several advantages: there is no tax or National Insurance to pay by either of you, it is fully tax deductible in your business, and the recipient gets a credit on their National Insurance record which counts towards their entitlement to certain State benefits.

You may also be liable to Class 4 NIC at only one per cent on your business profits, but working this out and claiming any refunds can be complex, so once again professional advice is a good idea.

This is a new relief, introduced from April 1 2005, which allows small businesses a reduction of up to 50 per cent of their full charge for rates.

If you register you can claim back VAT; you don't have to exceed the turnover limit, but remember that your competitors might not be charging VAT or your customers might not be able to reclaim it, which would put you at a competitive disadvantage.

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