With good news being in short supply this year, November brought a silver lining to many businesses with the government’s AIA extension announcement. In a welcome move, the £1million temporary cap on expenditure qualifying for Annual Investment Allowance will be extended to 1 January 2022.
This extension is a much-needed boost to support and encourage businesses to invest in plant and machinery, especially during the current uncertainties. The AIA provides 100% tax relief on expenditure incurred in year on qualifying plant and machinery and on fixtures in buildings as opposed to the lower rates of the normal writing down allowances.
The amount of the AIA has varied significantly since it was introduced; it has been as low as £25,000 and as high as the current temporary rate of £1,000,000, which was introduced in January 2019 to stimulate business investment in the economy. This extension gives businesses planning capital expenditure more time to consider ways they can take advantage of the higher amount while it is available.
However, the timing of the expenditure within your particular accounting year can be important, especially for
expenditure incurred around the time when the limit reverts to £200k. If you are planning any capital expenditure, do get in touch to make sure you get the allowances you are expecting!
Businesses should consider how they can take advantage of this valuable extension, and what the transitional rules could mean for them. If you would like to discuss further please contact firstname.lastname@example.org