Annual Investment Allowance

Posted on January 21, 2013

MAJOR INCREASE IN CAPITAL ALLOWANCES

– ANNUAL INVESTMENT ALLOWANCE (AIA)

In the recent autumn statement the Chancellor announced that the Annual Investment Allowance (AIA) will be increased from £25,000 to £250,000. Starting on 1 January 2013 and for the next two years, £250,000 worth of investment will qualify for 100% relief, the chancellor said. ‘This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs.’

The AIA permits 100% relief to be claimed on expenditure qualifying for plant and machinery capital allowances. Plant and machinery includes obvious items such as computers, equipment, furniture and fittings but also assets inherent in buildings such as heating, air conditioning, electrics, sanitary appliances etc. Capital allowances for expenditure on these items are normally given at rates of either 8% or 18% depending on the type of asset. Under the increased AIA, 100% tax relief will be available for the first £250,000 of qualifying expenditure, providing a significant acceleration in this valuable tax relief.

If you are planning to invest in new machinery or spend money either refurbishing or acquiring a property careful consideration should be given to the timing of the investment to ensure that accelerated tax relief can be claimed under the increased AIA.

For further details regarding annual investment allowance, or if we can advise on any other issues regarding tax planning, please contact Garratts.

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