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The Annual Investment Allowance tax-relief scheme extended

A temporary increase in the Annual Investment Allowance (AIA) to £1 million was originally due to revert to £200,000 on 1 January 2021 but the Government has now extended this deadline to 1 January 2022 owing to the pandemic.

The AIA gives a welcome boost to cashflow for businesses which have invested in capital equipment, plant and machinery. Businesses can take advantage of the Government scheme and claim up to £1 million in same-year tax relief through the AIA for capital investments in plant and machinery assets until 1 January 2022.

How does my year end affect the way the allowance is calculated?

If you have a 31st December 2021 year end, the calculation is straightforward as your tax return period will coincide with the end of the increased AIA allowance.  But if you have a 2022 year end the calculation will need to take into account the period of temporary increase and subsequently decreased AIA allowance. Your accountant will be able to advise you accordingly.
 

Do I qualify for the allowance?

Most businesses are eligible for the AIA, but there are exceptions where partnerships comprising individuals and companies are involved. If in doubt, speak to your accountant.
 

What type of assets can I claim for?

·       Trucks and vans

·       Plant and machinery

·       Cranes and diggers

·       Agricultural machinery

·       Building fixtures and fittings

·       Lathes and tooling

·       Office equipment

·       Computers and software


When can I claim?

You can only claim AIA in the period you bought the item. The Government defines this as:

·        when you signed the contract, if payment is due within less than 4 months

·        when payment’s due, if it’s due more than 4 months later

If you buy something under a hire purchase contract you can claim for the payments you have not made when you start using the item. You cannot claim on the interest payments. If your business closes you cannot claim AIA for items bought in the final accounting period.
 

How do I find out more?

To find out more about AIA and how it can help your business please contact us on 01908 487 561 and speak to a member of our sales team. Or request a call back here.

Full details about the AIA scheme are available on the www.gov.co.uk website.