With effect from 1 January 2016 the Annual Investment Allowance (AIA) is being reduced from £500,000 to £25,000.
AIA is a capital allowance deduction for capital investment in your business. The AIA has always been intended to encourage spending on equipment to help boost the economy. Investment that can qualify under AIA can receive 100% capital allowance and has been a generous tax break for many businesses, both unincorporated and incorporated. It is important to note that, AIA cannot be claimed where a partnership has a corporate member (Ltd).
Examples of assets that can qualify for AIA:
- Computers
- Plant
- Machinery
- Certain fixtures such as, kitchens, fire alarms, CCTV, etc.
- Integral features such as lifts, escalators, air conditioning and air cooling systems etc.
The date an expense is incurred is when the obligation to pay arises. This is usually when the goods have been delivered, however there is an exception to this rule.
If there has been a gap of more than four months between the date of delivery and date payment is required, the expenditure is not incurred until the date on which payment is required to be made.
Planning Tips:
If your business is looking to invest, it may be beneficial to ensure that the expense is incurred prior to the limit change, to take advantage of the 100% AIA.
For more advice, please contact Paul Dell at paul.dell@raffingers-stuart.co.uk.