In the Autumn statement, the Chancellor announced a tenfold increase in the amount of Annual Investment Allowance (AIA) available. The AIA gives full tax relief for expenditure on integral features and plant and machinery as it is incurred. It is not available on cars.
This will be the third change in the rate of this allowance in less than twelve months. Up to 31 March 2012 (for corporates) and 5 April 2012 (for other taxpayers) the allowance stood at £100,000. Since then, and until 31 December 2012, the allowance is £25,000.
For expenditure incurred on or after 1 January 2013 the maximum annual AIA becomes £250,000. This is for a two year period and so the annual AIA will reduce to £25,000 for expenditure incurred after 1 January 2015.
Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. The calculations are complex depending on the accounting year end and the date of the spend, with specific difficulties if the accounting period covers spending prior to the rate reduced in April 2012.
Please contact us before capital expenditure is incurred for your business in a current accounting period, so that we can help you to maximise the AIA available, you could potentially save £000’s of tax.
This article was compiled by Karen Ashton, Client Manager at Balance Accountants.