Announced as part of Budget 2014 back in March of this year, Chancellor of the Exchequer George Osborne has once again increased the Annual Investment Allowance (AIA) temporarily between 1 April 2014 (for corporation tax, 6 April 2014 for income tax) until 31 December 2015.
In a bid designed to stimulate business investment across the economy by increasing the time businesses have to make relatively heavy investments in plants or machinery, providing valuable assets for years to come, Mr Osborne doubled the AIA to £500,000, a figure that already saw a major increase just two years previous, as the Chancellor noted during his announcement:
“I want to do something today that helps all businesses invest. In 2012 I increased the Annual Investment Allowance ten-fold to £250,000. This generous allowance was due to expire at the end of this year – and all the business groups have urged me to extend it.”
Mr Osborne continued:
“We’re going to double the Investment Allowance to £500,000, extend it to the end of 2015, and start it next month. 99.8% of businesses will get a 100% investment allowance… [meaning] almost every business across Britain will pay no upfront tax when they invest in the future.”
The expiration date the Chancellor referred to was the period from 1 January 2013 to 31 December 2014 whereby he had previously increased the AIA from just £25,000 to £250,000 during Finance Act 2013.
This temporary increase positively affects any business owners who were looking to invest more than £250,000 in plant or machinery from now until 31 December 2015, with this positive impact most likely to affect small to medium-sized businesses (SMEs), providing them with an incentive to go ahead with capital expenditure in this area if they’ve been putting it off for some time, and indeed giving them the opportunity to increase said expenditure, if they so wish.
The increased AIA also provides a considerable increase in cash flow for businesses who were intending on investing over £250,000 in plant or machinery in the first place, due to the AIA being a 100 percent upfront allowance for all qualifying expenditure.
How to Claim
The Government note that all businesses can claim AIA on qualifying expenditure for, “both general and ‘special rate’ plant and machinery.” There are exceptions, of course (company cars being a clear one), with HMRC having provided a detailed list of what constitutes qualifying and non-qualifying expenditure on their website.
‘Plant or machinery’ actually covers most business assets. Below are a few examples of what expenses would qualify as an AIA expense:
- computers and all types of office furniture or equipment
- vans, lorries and other vehicles (excluding cars)
- building fixtures, including shop fittings and kitchen/bathroom fittings
- agricultural machinery such as tractors and combine harvesters
- gaming machines and amusement park rides
If you happen to spend over the temporary annual limit you can still claim relief on any spending over £500,000 via means of the standard capital allowances regime.
Barring any further Government interventions, the current, temporary AIA is set to return from £500,000 to £25,000 from 31 December 2015.
Experienced Advice on Annual Investment Allowance
To speak with a professional to discuss how you can benefit from this temporary increase in the Annual Investment Allowance (AIA), contact us today on 020 7129 1199 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.