Investing in new machinery and equipment for your practice can be an expensive business but tax reliefs, known as capital allowances, are available to help you fund the cost.
The allowances cover purchases of items such as medical or office equipment, cars, bikes and vans as well as integral features of your surgery property. Expenditure that is a repair rather than a capital purchase gets tax relief as a direct expense within your accounts.
Which purchases qualify for relief?
Typical plant and machinery purchases we see incurred by GP practices are medical and office equipment (touch screen booking screens and telephone systems being very common), integral features, partner cars and fixtures including kitchens for staff rooms and fire alarm systems.
Integral features are defined in HMRC guidance as including lifts, escalators and moving walkways, space and water heating systems, air-conditioning systems, water or electrical/lighting systems and even external solar shading.
For example, if you have to invest in new flooring to meet hygiene standards as a result of a Care Quality Commission inspection or in COVID related partitions and screens, these costs should qualify for relief. However, as the rates of allowances vary, it is vital to get expert advice on building related allowances, especially with new premises or major renovations, to ensure that reliefs are claimed in the most beneficial way.
How much tax relief?
Although you will get relief on the whole cost of all assets over time, relief is given faster for some types of assets and practices. For example, practices that operate partly through a corporate structure may be to claim the 130% super-deduction on relevant capital purchases made before 31 March 2023. Similarly, for investment in integral features, a 50% relief is available before 31 March 2023.
These reliefs currently sit alongside the Annual investment allowance (AIA) that is available to both companies and sole traders/partnership practices. For assets that qualify for the AIA – broadly anything that is not a car – 100% of the cost can be claimed as a deduction against profits in the year of purchase, up to a limit of £1m per year. This tax year limit may return to just £200,000 from April 2023 unless the pending government reforms to all capital allowances include setting a new AIA limit.
Typical capital expenditure levels for most GP partnerships means that the AIA gives full relief in the year in which the expense is incurred, significantly reducing the net investment cost.
Cars used in the business
We are starting to see more surgeries consider the purchase of pool vehicles that are kept at the surgery and used for emergency visits or the delivery of patient prescriptions. As these vehicles are used 100% for business purposes, tax relief on the cost of the vehicle at the relevant rate can be claimed against partnership profits.
Cars are treated separately for capital allowance purposes, but the good news is that 100% relief is available in the year of purchase of an electric car used for business purposes. For cars with very low CO2 emissions, below 50g/km, relief is given as an 18% writing down allowance of the cost per year: for more polluting cars relief is only given at 6% a year. Where vehicles are used partly for business and partly for private purposes, the allowance is restricted to reflect the element of business use.
Please get in touch with Claire McGuigan for help and advice on how capital allowances can benefit your practice.