A capital allowance is a deduction on a company’s Corporation Tax for the depreciation of an asset. When a company purchases a large asset, such as an expensive piece of machinery or a building, they may be entitled to claim tax relief for the depreciation in its cost. Capital allowances can be taken when the business is owned by a sole trader, partnership or a corporation. This allowance against the cost of the asset can be offset against general income or profits, thereby reducing the owner or company’s overall tax burden.

While the tax treatment of assets may not be the defining factor in the purchase of key equipment, it does function as part of the decision-making process.

Because the rules regarding capital asset tax allowances do tend to alter from year-to-year and also vary, depending on the asset and type of company, independent capital allowance firms have sprung up in the UK and elsewhere to advise companies on what they can and cannot claim allowances on. These firms are also able to advise companies regarding the acquisition of new capital assets and whether purchasing or leasing is the best option. One such expert firm is Lovell Consulting, based in Central London.

Because the tax system is so complex and constantly changing, many companies are now looking for expert guidance and this is what initially created the need for independent capital allowance firms. In the US, independent firms that advise companies tend to be CPAs (Certified Public Accountants), MBA graduates or individuals with years of experience in taxation. As companies found that these expert organisations could often save them more in taxes than the cost of the service, their reputations grew and they became more widely used.

In the UK, the situation is very similar, and specialised firms assist companies with research and development tax relief and credits as well as capital allowances and property-related credits. Lovell Consulting – established and built by John Lovell over a period of years – has gained a rigid trust among respect among industry experts.