The Annual Investment Allowance is often a valuable relief for businesses making capital purchases, affording a 100% write off on qualifying purchases against profits chargeable to Corporation Tax.
The AIA is currently set at a limit of £1,000,000 per year on qualifying expenditure. However, this was due to be restricted to the ‘usual level’ of £200,000 from 31 December 2020 meaning many businesses who had planned significant expenditure were rushing to make qualifying purchases before the deadline expires at the end of this month.
However, some good news was released from HMRC recently when they announced that the temporary increase in the Annual Investment Allowance will be extended for a further twelve months to 31 December 2021.
The extension of the temporary AIA limit to 31 December 2021 means that Businesses that incur significant capital expenditure on plant and machinery by 31 December 2021 will get tax relief on the cost much earlier than if the purchase was to be made after that date.
As a reminder, qualifying expenditure includes but is not limited to:
● Plant and machinery
● Costs of demolishing plant and machinery
● Some fixtures e.g. fitted kitchens, bathroom suites, fire alarms and CCTV systems
● Alterations to a building to install other plant and machinery
● Integral features (see below)
Integral features are those items which are integral to commercial buildings and structures, particularly modern buildings and include many items comprised into the fabric of the building itself. The following are classed as integral fetures:
● Electrical systems (including lighting systems)
● Cold water systems
● Space or water heating systems
● Powered systems of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system
● Lifts, escalators and moving walkways
As with any HMRC guidance there are specific ‘exclusions’ and ‘fine print’ relating to assets which do not qualify for these allowances, therefore we would suggest that before you embark on a new project or spend siginficant amounts of capital, you speak with us first, so that we can advise as to whether the particular items of expenditure qualify for these allowances.
If you would like us to explain the extension to you further or are planning on significant expenditure in the near future, please do get in touch so that we can give the most up to date guidance.
If you would like further information, please don’t hesitate to contact:
George Hardey, Tax Director
(george.hardey@waltonscw.co.uk)
tel: 01429 234414
Tom Bleasdale, Tax Senior
(tom.bleasdale@waltonscw.co.uk)
tel: 01429 234414
Don’t forget … if you are planning to spend on plant and machinery, equipment etc, you may be eligible for a grant. Talk to: Gillian Baker, our Business Development and Growth Consultant for more information.
(gillian.baker@waltonscw.co.uk)
tel: 01429 234414
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