Lee Sharpe looks at some of the technical considerations governing capital allowances and incorporating a business.
The incorporation of a business can be quite challenging, from the perspective of capital allowances. The cessation of a qualifying activity for capital allowances purposes precipitates a balancing event, although further components of the legislation can then come into play. These do not, however, work as some people might understand.
Given the disparity between potential rates of income tax (and accompanying exposure to National Insurance contributions (NICs), where appropriate) and the generally flat rate of corporation tax, significant real tax savings stand to be made, if the transition can be optimised. Note that a ‘qualifying activity’ does not necessarily mean only a trade, profession or vocation but also a range of other business
