Are you planning to buy Assets? Annual Investment Allowance increase starts in January

Investment Capital Allowance

In the Autumn statement (Finance Bill 2013) it was announced that for 2 years from 1st January 2013 the Annual Investment Allowance will be increased from £25,000 to £250,000 (an increase of 10 times!).

This is fantastic news if you are planning asset purchases because it will reduce your tax bill.

Some examples of AIA qualifying expenditure

‘Plant or machinery’ actually covers almost every sort of asset a person may buy for the purposes of his/her business. Really the only business assets not covered are land, buildings and cars (which are excluded by one of the ‘general exclusions’). Typical examples of plant or machinery include:

    • computers and all kinds of office furniture and equipment
    • vans, lorries, trucks, cranes and diggers
    • ‘integral features’ of a building or structure, see CA22320
    • other building fixtures, such as shop fittings, kitchen and bathroom fittings
    • all kinds of business machines, such as printing presses, lathes and tooling machines
    • tractors, combine harvesters and other agricultural machinery
    • gaming machines, amusement park rides
    • computerised /computer aided machinery, including robotic machines
    • wind turbines and fibre optic cabling.

Transitional Calculation

A company with a financial year chargeable period from 1 April 2012 to 31 March 2013 would calculate its maximum AIA entitlement based on:
(a) the proportion of a year from 1 April 2012 to 31 December 2012, that is, 9/12 x £25,000 = £18,750; and,
(b) the proportion of a year from 1 January 2013 to 31 March 2013, that is, 3/12 x £250,000 = £62,500.
The company’s maximum AIA for this transitional chargeable period would therefore be the total of (a) + (b) = £18,750 + £62,500 = £81,250, although in relation to (a) (the part period falling before 1 January 2013, no more than a maximum of £25,000 of the company’s actual expenditure in that particular part period would be covered by its transitional AIA entitlement (the maximum claimable before the increase to £250,000).