skip to navigationskip to main content

Phone: 01372 365 839 

Email:

Increased Annual Investment Allowance

Newsletter issue - January 2013.

The annual investment allowance (AIA) gives a 100% deduction for tax purposes for the cost of plant, equipment and certain fixtures in buildings, which qualify for capital allowances. The AIA has an annual cap. This started at £50,000 in 2008, was increased to £100,000 by the previous government, and was cut to £25,000 in April 2012 by the current incumbents.

Now the AIA cap will temporarily increase to £250,000 for expenditure incurred in the two years from 1 January 2013. Equipment bought on and after 1 January 2015 will be subject to the reduced AIA cap of £25,000, unless the Chancellor of the day has another change of mind. Expenditure that qualifies for capital allowances, but which exceeds the available AIA cap for the business is given tax relief at the rate of 18% or 8% per year, depending on the nature of the item purchased.

The AIA cap for accounting periods that end on 31 December 2013 and 31 December 2014 will be £250,000, fair and square. But where your business has an accounting period that straddles 1 January 2013, the calculation of the AIA cap is complicated. Say your accounting period ends on 31 March 2013. You need to split the accounting period (for AIA purposes only), into:

a. 1 April 2012 to 31 December 2012 (portion of £25,000 AIA); and
b. 1 January 2013 to 31 March 2013 (portion of £250,000 AIA).

The maximum AIA for the business is the sum of the portions of the AIA cap due for each of those sub-periods a) and b). However, the expenditure must also be spread over those two periods to gain the maximum advantage from the AIA. The business cannot spend its maximum AIA in the period from 1 January 2013 to 31 March 2013.

The complications do not stop there, as there is protection for businesses that have already spent their maximum AIA of £25,000 in 2012. Please ask us to check how much the AIA cap will be for your business before you purchase any expensive equipment.

Choosing a Service

Choosing an accountant that matches your needs

What Our Clients Say

Read the reviews from some of our satisfied clients

Free Initial Consultation

Understanding your accountancy requirements

Request a Callback

Lets talk at a more convenient time for you

Great reasons and promises we make to you which is why you should call us before deciding on your accountant.

Our Promises

We’re a dedicated team which strives to provide success to our clients in regards to all their accountancy needs.

Meet our team