The Annual Investment Allowance (AIA) is a 100 per cent allowance for plant, machinery and equipment capped at an annual amount.
This means that all expenditure within this capped amount can be written off against the taxable profits for the same period. Expenditure over that amount is subject to the normal writing down allowances for 18 per cent or 8 per cent.
AIA is available to most companies, individuals and partnerships-where all members are individuals, and is an incentive to invest as it can help cash flow as the tax relief for such expenditure can be claimed in the year of investment, rather than over a number of years.
From April 2014, AIA for Corporation Tax and Income Tax has been set at £500,000 per year up to 31 December 2015. It will return to £25,000 from 1 January 2016.
AIA is available for most assets purchased by a business, such as:
- machines and tools
- office equipment
- building fixtures
It does not apply to cars.
If you have any queries or would like some further advice please give Sue Stephens our Personal Tax Consultant a call.