Annual Investment Allowance
The annual investment allowance is a way to claim tax relief on many assets that your business will buy. It’s a kind of capital allowance.
You can claim capital allowances when you buy assets that you keep to use in your business, for example:
• equipment
• machinery
• business vehicles, for example cars, vans or lorries
These are known as plant and machinery.
You can deduct some or all of the value of the item from your profits before you pay tax.
Capital Expenditure That Qualifies for the AIA
Most assets purchased for business purposes can be claimed as qualifying expenses for AIA, with the primary categories as 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
What you cannot claim on
You cannot claim AIA on:
• cars
• items you owned for another reason before you started using them in your business
• items given to you or your business
Claim writing down allowances instead.
Changes in AIA
The AIA amount has changed several times since April 2008.
Sole traders/partners Limited companies AIA
1 January 2019 – 31 December 2020 1 January 2019 – 31 December 2020 £1 million
1 January 2016 – 31 December 2018 1 January 2016 – 31 December 2018 £200,000
6 April 2014 – 31 December 2015 1 April 2014 – 31 December 2015 £500,000
1 January 2013 – 5 April 2014 1 January 2013 – 31 March 2014 £250,000
6 April 2012 – 31 December 2012 1 April 2012 – 31 December 2012 £25,000
6 April 2010 – 5 April 2012 1 April 2010 – 31 March 2012 £100,000
6 April 2008 – 5 April 2010 1 April 2008 – 31 March 2010 £50,000
It is worth remembering that connected companies are only entitled to one AIA between them.
The legislation includes a series of transitional rules, which can be complex. It is worth seeking guidance where expenditure on qualifying AIA items is being considered.
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