HOW DOES THE ACA WORK?
With the existing Capital Allowances tax structure, when money is spent on capital equipment companies can deduct the cost of this equipment from their profits proportionally over a period of 8 years, i.e. the annual taxable profit is only reduced by 1/8 of the total equipment cost.
With the new Accelerated Capital Allowance: When money is spent on eligible energy efficient capital equipment, the company can deduct the full cost of this equipment from their profits in the year of purchase, i.e. the taxable profit in year one is reduced by the full cost of the equipment.
The ACA benefits you in year one by:
> Reducing your tax bill
> Increasing your cash flow