2 years ago, the annual investment allowance increased from £200.000 to £1,000,000 for a limited time.
That was due to end on 31st December 2020 but it has recently been announced that the £1 million pound cap has been extended until 1st January 2022 in a bid stimulate investment in UK manufacturing.
What is an Annual Investment Allowance?
The Annual Investment Allowance is a way for businesses to claim tax relief for buying equipment. It is a kind of capital allowance.
If you buy a piece of equipment that qualifies for the AIA, you can deduct 100% of its cost from your profit.
Connected companies are only entitled to one AIA between them but have the option to decide how to allocate it.
What does this mean?
This means you can make up to £1 million pound of qualifying purchases to offset against your profits.
What expenses qualify?
Most assets purchased for business purposes can be claimed as qualifying expenses for AIA, with the primary categories listed below:
-Office equipment including computer hardware and certain types of software, and office furniture.
-Parts of a building referred to as integral features.
-Certain fixtures, such as air conditioning, fitted kitchens, or bathroom fittings.
-Lorries or vans used for moving purposes.
-Machines used for business purposes.
-Agricultural machinery including tractors.
-Machines used for providing entertainment, such as arcade game machines.
-Assets that cannot be claimed include buildings, cars, land or structures and items used solely for business entertainment.
Part of the cost of cars used for business purposes can be deducted, but not as a part of the AIA. The exception to this rule on cars is the cars used by driving schools, which must be adapted to have dual control to be claimed for through AIA.
For more guidance and advice to ensure you get the most out of this allowance please call us on (01482) 888820.