Business investment and the annual investment allowance

The AIA allows businesses to write off the full cost of qualifying expenditure and in recent years the amount allowed as a deduction for tax purposes has fluctuated wildly.

From January 2016, the annual limit for AIA expenditure has been set at a new permanent limit of £200,000. Accordingly, this is the amount that can be claimed for 2016-17.

AIA is generally available on a purchase of plant and machinery that can include:

  • Fixtures and integral features
  • The alteration of land for the purpose only of installing plant or machinery
  • Vans, lorries and motorcycles

Expenditure that would not qualify for AIA includes:

  • Motor cars
  • Expenditure which would not qualify for capital allowances such as on buildings or structures.
  • Plant and machinery which was originally used for another purpose, for example, items owned personally which are subsequently introduced into the taxpayer’s business.
  • Plant and machinery acquired in the final period of business before the cessation of trade.

Also, AIA is not available to:

  • Sole traders or partners using cash accounting as from 6 April 2013 as this has modified rules in respect of deductions for plant and machinery.
  • A partnership with a corporate partner which could be a company or an LLP.

This remains a generous tax allowance, as the full cost of qualifying purchases can be written off against trading profits before calculating any tax due.

Business owners should be advised that a claim for AIA in the final period of trading prior to cessation of trade would not be allowed.

Latest Blog
25
Apr

High risk and all eggs in one basket

The “boomer” population was used to the idea that you could have a job fo...

Read More
23
Apr

More corporate red tape

We are still waiting for the government to introduce secondary legislation that will ...

Read More
18
Apr

New employment protections

The following changes were enacted from 6 April 2024. These changes apply to England,...

Read More
16
Apr

Opening up small company reporting

Companies House are working on detailed changes that will require small and micro siz...

Read More