2014 Changes To The Annual Investment Allowance For Capital Equipment Could Benefit Your Business

In recent times business owners have sometimes tended to put investment in plant and machinery on the back burner because of economic instability.

It is in response to this that the Chancellor announced in the March 2014 Budget that there would be a temporary increase in the AIA limit will from £250,000 to £500,000  per annum with effect from 1 April 2014 for companies and from 6 April 2014 for sole traders/partnerships.

Window of opportunity for businesses to acquire capital equipment

The objective behind this initiative is to enable more businesses to undertake capital investment with a significantly reduced level of financial exposure.

However, although no announcement has yet been made, it is expected that the AIA limit will revert to £25,000 per annum with effect from 1 January 2016. It may therefore be important that businesses planning to invest in the near future do so before 2016 whilst the higher temporary increase in the AIA limit is in place.

Benefit of AIA  for business

A key advantage of AIA is that it accelerates the timing of tax relief on qualifying capital expenditure. Depending on the timing of the investment, the temporary increase in AIA means that businesses may be able to bring forward the tax relief on more of their capital expenditure. However it is worth businesses considering advancing or deferring investments in order to maximise their AIA over the period it is available.

More about AIA

The AIA was first introduced in April 2008, providing 100% allowance on the first £50,000 investment in qualifying capital expenditure. The maximum allowance was doubled to £100,000 for qualifying expenditure incurred from 1 April 2010 (6 April 2010 for unincorporated businesses), and was reduced to £25,000 with effect from 1 April 2012 (06 April 2012 for unincorporated businesses).  In the Chancellor’s 5 December 2012 Autumn Statement the AIA limit was temporarily increased from £25,000 to £250,000 for a two-year period from 1 January 2013 to 31 December 2014, before being temporarily raised to £500,000 in the recent budget.

Qualifying expenditure covers most assets purchased for use by businesses

• Office furniture and equipment

• Vans, lorries and equipment

• Building fixtures e.g. shop fittings, kitchen or bathroom fittings

• Business machines e.g. printing press,lathes, tooling machines

• Tractors, combine harvesters and other agricultural machinery

• Gaming machines, amusement rides

• Computer hardware and qualifying software

• Computerised/computer aided machinery including robotic machines

• Wind turbines and fibre optic cabling

• Driving school cars (adapted with dual control mechanisms)

The following items of capital expenditure do not qualify.

• Land, buildings or cars

• Expenditure incurred in the accounting period when trade ceased permanently

• Existing plant and machinery

• Plant and machinery that was gifted

• Plant and machinery used by a person for leasing under a long funding lease and

subsequently brought into use by that person for the purpose of a qualifying activity

• Change in the nature/conduct of the trade carried out by a person other than the person incurring the capital expenditure.

Download the AIA changes 2014 Fact Sheet

Download the AIA 2104 Changes Fact Sheet for much more information about the AIA opportunity for business and answers to your AIA queries.

Alternatively call us now on Tel: 01494 611 456 to discuss AIA, your capital equipment requirements and leasing options.