Don’t overclaim for equipment purchases



You can use the Annual Investment Allowance (AIA) to claim a very generous 100% first year tax relief for qualifying expenditure on plant and machinery. The allowance is available for most assets purchased by a business but does not apply to cars.

The AIA was set at £200,000 per calendar year for all qualifying expenditure on or after 1 January 2016. However, there is a new temporary increase in the allowance that came into effect from 1 January 2019 to £1 million. This temporary increase will last until the end of 2020.

The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.

The timing of any large equipment purchases should also be carefully considered to ensure that, where possible, the purchase of your qualifying equipment is made at the optimal time.

A note of caution

If you are self-employed, you should be careful when making a claim for the AIA. This is because you do not want to ‘overclaim’ and by doing so reduce your taxable income below your personal allowance. This would result in you effectively wasting all or part of your annual personal allowance. We would recommend that you use as much AIA as is available to reduce profits to no lower than the personal allowance relief threshold.


What expenditure qualifies for the Annual Investment Allowance?



The Annual Investment Allowance (AIA) was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. However, in the Budget earlier this year, the Chancellor announced a temporary increase in the allowance to £1 million for a 2-year period from 1 January 2019 to 31 December 2020.

The AIA allows for 100% first year tax relief for qualifying expenditure on plant and machinery. The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers.

The AIA does not apply to cars. Also, you cannot claim AIA on items you owned for another reason before you started using them in your business or on items given to you or your business, although writing down allowances may be available.

The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a Furnished Holiday Lettings (FHLs). Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.

Businesses thinking of incurring large items of capital expenditure over the coming months, should ensure that any purchase is properly timed to take full advantage of the temporary increase in the AIA limit.


Autumn Budget 2018 – Annual Investment Allowance



The Chancellor’s announcement of a temporary five-fold increase in the Annual Investment Allowance (AIA) will be welcomed by many small and medium sized businesses looking to incur significant capital expenditure on plant and machinery.

The Annual Investment Allowance (AIA) was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. The announcement by the Chancellor provides for a temporary increase in the allowance to £1 million for a 2 year period from 1 January 2019 to 31 December 2020.

The AIA allows for 100% first year tax relief for qualifying expenditure on plant and machinery. It can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA. The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers. The AIA does not apply to cars.

Businesses thinking of incurring large items of capital expenditure over the coming months should ensure that any purchase is properly timed to take full advantage of the temporary increase in the AIA limit.