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Businesses delay capital investment

Almost two thirds of UK businesses generated a cash surplus in the last tax year, according to research by the Institute of Chartered Accountants in England and Wales (ICAEW).

The survey of 500 businesses found that 62% made a cash surplus last year while 69% expect to make a cash surplus during the current tax year.

Despite this, many businesses are delaying capital investment until they feel assured about the direction of the economy.

The ICAEW found:

  • 24% of businesses are holding 20% or more of their annual turnover
  • 70% are not confident enough in their business prospects to invest
  • 52% are unsure about the economy’s long-term prospects.

The ICAEW’s latest Business Confidence Monitor showed that 17% of businesses felt less confident about their prospects in Q1 2015, up from 7% in the same period in 2014.

Stephen Ibbotson, director of business at the ICAEW, said:

“We don’t want to see firms just battening down the hatches which could stop our recovery in its tracks.

“The next government should make it a priority to confirm the new rate of the Annual Investment Allowance. Businesses plan long-term and waiting until December’s Autumn Statement isn’t quick enough.”

The Annual Investment Allowance

If you’re a company, partnership or sole trader, you can deduct 100% of your qualifying plant and machinery expenditure against your pre-tax profits with the Annual Investment Allowance (AIA).

The AIA is available for most plant and machinery expenditure. This includes machines, office equipment, certain building fixtures, vans and lorries. However, certain expenditure such as cars, buildings and land do not qualify.

The Chancellor announced during Budget 2015 that the allowance will be reviewed at Autumn Statement 2015, disappointing some business leaders who wanted to see an extension to the current £500,000 allowance. The AIA limit is scheduled to fall to £25,000 after 31 December 2015.

However, although its future remains uncertain, businesses still have at least 7 months to take advantage of the current allowance.

Manchester accountants Jack Ross can help you take advantage of capital allowances. Contact us today on 0161 832 4451 or email