FARMING BUSINESSES and syndicates like machinery rings which have invested heavily in plant and tackle could have to repay thousands of pounds to the Inland Revenue as it tightens up a little-known ruling.
Since 1998, many small and medium-sized companies and businesses have been able to use first-year capital allowances to reduce the amount of tax payable on new kit.
This stands at 40% for most items, although claims of up to 100% can be made for energy-saving equipment.
But the Revenue said recently that trusts, or partnerships that contain a trust or company and are known as mixed partnerships, cannot claim first-year allowances.
“This has not yet been publicised,” said Carlton Collister, senior tax manager with accountant Grant Thornton.
“Such businesses might have to amend the 2004 partnership and personal tax return forms and notify the revenue regarding claims made in earlier years where relevant,” he added.
“The revenue has stated that such claims are open to challenges and penalties, presumably with the risk of discovery assessment in respect of earlier years.”