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The Annual Investment Allowance (AIA) provides an immediate deduction to many business for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit.
The maximum annual amount of the AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. George Osborne has now told us in the Summer Budget what the 'permanent' amount will be from 1 January 2016. It is £200,000.
What have also been confirmed are the transitional provisions to calculate the amount of AIA in an accounting period which straddles the date of change. Two calculations need to be made:
It is the second figure that can catch a business out. For a company with a 31 March year end, under calculation 1 the company will be entitled to up to £425,000 of AIA (9/12 x £500,000 + 3/12 x £200,000). However for expenditure incurred on or after 1 January to 31 March 2016 the maximum amount of relief will only be £50,000 (3/12 x £200,000).
So check with us what will be the tax efficient capital expenditure limits between 1 January 2016 and the end of the accounting period for your business.
Why not contact Wilkes Tranter & Co Limited today for more information or a FREE no obligation quote.
Government borrowing fell to £7.8 billion in December 2023 giving Chancellor Jeremy Hunt more scope to make the tax cuts he has hinted at in the Spring Budget.
Tax cut promises may need to be scrapped as a result of the UK being in an 'unfortunate economic and fiscal bind', the Institute for Fiscal Studies (IFS) has warned.
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