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Annual Investment Allowances – time to spend?

March 2014

Have you taken account of the maximum Annual Investment Allowance (AIA) available and invested in new plant and machinery for maximum tax benefits, writes Tony Rookes, a partner at accountancy firm Southgates, Chartered Certified Accountants.

The government had previously reduced the AIA to just £25,000 from 6th April 2012 but from 6th April 2013 (1st April 2013 for Companies) it was increased to £250,000. But what is AIA?

The AIA is a capital allowance which offers tax relief at 100% of the qualifying expenditure, including plant and machinery, in the year it is purchased. This £250,000 is pro-rata for periods which are not 12 months or for periods that span the 5th April. These allowances are available to most businesses and individuals provided the activity is a trading activity, commercial property letting or leasing business. Employees can also claim this allowance should they use their own assets as part of their employment.

There are a few exclusions and if you operate through a group structure or have a number of associated (related) companies then the annual amount is split across these companies. The purchase of cars and certain other assets will not qualify for this allowance. You should take advice on this prior to purchasing.

If you have taken advantage of the whole allowance then any additional expenditure will attract the usual writing down allowances of a flat rate 18 % or some types of expenditure may only qualify for writing down allowance of 10 per cent such as electrical or cold water systems, thermal insulation and long-life assets.

This allowance does not affect the usual treatment of repairs expenditure which is normally an allowable deduction against income and so full tax relief is given immediately.

Although this allowance is expected to last until 5th April 2015, if your year end is 5th April 2014, or 31st March 2014 for Companies, then you should take advice on the amount of Annual Investment Allowance available to you or your company and consider whether there are any pieces of plant or equipment your business needs to enable you to obtain the maximum relief available.

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