How will investing in bim affect your tax bill?
Whether you make the leap before or after the end of March could make a difference
While the cost of bim software will vary according to an individual practice’s requirements, it is fair to say that it represents a substantial outlay and one that could have greater financial implications from April.
Because the software will be used for a number of years it represents capital rather than revenue expenditure. This is important because of the way in which companies receive tax relief on their spend.
Until the end of March, practices are entitled to an Annual Investment Allowance (AIA) enabling them to claim full tax relief on the first £100k of capital expenditure in a year. That means that for most architects the cost of purchasing bim software will be set against profits in the year of purchase.
However, from April the AIA will decrease to £25,000. While the cost of bim software may well fall within this reduced allowance, you also need to consider all other capital items purchased in the financial year — such as laptops, iPads and desks — which together could take you over the £25,000 threshold.
The excess will be eligible for capital allowances which is a far less generous regime and only allows a firm to write off 20% of your expenditure against profits each year.
Cash flow permitting, practices expecting to make the move to bim in the near future should consider whether it would be beneficial to make the investment before the end of next month in order to accelerate their tax relief.
bd and Building Present BIM Show Live, a 2 day conference and exhibition taking place on the 9 and 10 May 2012 at the Business Design Centre, London. Visit www.bimshowlive.co.uk to register.