Contributed by ACCA, in their own words
Temporary increase sees AIA double to £500,000.
Annual investment allowance was introduced in 2008 to encourage businesses to invest in capital equipment. Under the regime, businesses may claim capital allowances of 100% of the expenditure incurred.
Since its introduction, the threshold has been increased and decreased and then increased again in Finance Act 2013 to £250,000. The increased limit of £250,000 was intended to be for a temporary two year period, for qualifying capital expenditure incurred in the period from 1 January 2013 to 31 December 2014, after which time the allowance would revert back to £25,000.
The move was heralded by business leaders looking to invest in the future and there were calls for the temporary £250,000 annual investment allowances to be made permanent.
The Chancellor responded in the Budget 2014 by increasing the annual investment allowance from £250,000 to £500,000 per annum with effect from 1 April 2014 for companies and 6 April 2014 for unincorporated businesses, up to 31 December 2015.
This is another temporary increase and the AIA limit will revert back to £25,000 per annum with effect from 1 January 2016.
Businesses that incur expenditure on plant and machinery will be able to obtain capital allowances of either 18% or 8% on any excess.
The changes in the rates will be subject to the usual transitional quirks and headaches, which will be covered at a later date on ACCA’s Technical Advisory website.