Bad news for golf courses, good news for smaller businesses

If you run a bowling alley you can write-off the cost of the machinery against tax. If you run a golf course and create greens, fairways, bunkers, etc, you cannot.

You may ask "why not?", and the answer is that the Inland Revenue has just won a case before a tax tribunal. There appears to be little logic in this decision, but unfortunately the law is clearer about tax relief for other capital expenditure.

Currently a business can write-off expenditure on 'plant' - which includes furniture, fixtures, machinery, trucks and vans, etc - at the rate of 25 percent per year on the written down value (termed 'writing down allowances'). You can also claim writing allowances on cars up to a maximum of £3,000 per year for each car.

It is also possible to claim allowances on 'plant' which is part of a building, eg air conditioning, car park illumination, carpets and other loose floor coverings, emergency lighting, escalators, lift and lift shafts, heating installations, fittings, pipes and radiators, moveable partitions and wash basins.

At present, some businesses are entitled to higher tax allowances on plant. These are the so called 'small and medium sized businesses' defined as businesses which satisfy two of the following three conditions: turnover less than £11.2 million; assets up to £5.6 million; no more than 250 employees.

The requirement is satisfied provided that the business was small or medium sized for the year in which the expenditure was incurred or for the previous year. If a company is a member of a group then the group itself must be small or medium sized.

Small and medium sized businesses can claim 50 per cent first year allowances for expenditure (excluding cars) in the year to July 1, 1998, and 40 per cent for the following year.

Most businesses will qualify for the 50 per cent and 40 per cent first year allowances - clearly the message is 'buy now!'.

As always, when dealing with tax, seek professional advice before taking any action.

Peter Meredith is a partner with Clark Whitehill Josolyne

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.