The biggest surprise in the Chancellor’s Autumn Statement was the tenfold increase in the Annual Investment Allowance (AIA) only months after it was reduced. However, the way the increase is being introduced is not necessarily straightforward.
The AIA provides a 100% deduction for the cost of plant and machinery purchased by a business up to an annual limit which is:
– £100,000 up to 1 April 2012 fro companies (6 April for unincorporated businesses)
– £25,000 up to 31 December 2012
– £250,000 from 1 January 2013
It will revert to £25,000 from January 2015.
So if you incur expenditure on plant from 1 January 2013, you can spend up to £250,000 and get a full tax write off then? Well, not quite.
There are three main points to note. The first two have always been a feature of AIA:
– There is no AIA on some plant – the main exclusion being cars
– The AIA limits may need to be shared with other businesses which are under common ownership
– If the accounting period of the company straddles 1 January 2013, there are special rules being introduced which may restrict the AIA to much lower figure in the straddling accounting period.
Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis.
The special rules are published as draft legislation and so some of the detail may change. Please contact us if you are about to incur a significant amount on plant so that we can best advise you.