This article considers the question: should businesses invest in new equipment or other long-term capital acquisitions at this time?
In truth, no one knows what the impact of the Brexit will be? Brexiteers believe that the floodgates will open, and the rest of the world will rush to buy our goods and services whereas Remainers, expect recession to return when the EU drawbridge is lifted.
No doubt the reality will sit somewhere between these two extreme points of view.
With these uncertainties nonetheless present, is this a good time to consider investment in new plant and equipment or that new commercial building you have your eye on?
As always, a considered response to this question is: maybe, maybe not.
Most equipment purchases will qualify for a tax break of up to £200,000 a year – as long as the purchase fits the criteria for the Annual Investment Allowance – for example, cars do not generally qualify, but commercial vehicles and other plant and equipment will. Accordingly, as the economic outlook is unclear, making purchases to take advantage of tax reliefs may not be the most prudent course of action.
Then, there is investment in equipment that will allow you to develop a new income stream for your business. More than likely, this would be a speculative investment, with higher expected returns, but higher risks. This type of investment may be best left until the immediate effects of Brexit can be ascertained and fact6ored into your business development planning.
Finally, there are investments that will make your existing business more efficient and possibly more profitable. For example, new IT and software or replacing other worn-out business assets with up-to-date alternatives.
This final area may be a plausible investment opportunity and one that will position you nicely whatever the Brexit outcome may be.
What we would suggest is a careful consideration of your options based on a combination of tax benefits, payback periods and returns on your investment. As a downturn in economic activity is possible, this is probably not the time to throw caution to winds and make unconsidered investments.
Please call if you would like our help when making these judgements for your business.