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Annual Investment Allowance (AIA) for businesses

The increase in the amount of capital expenditure qualifying for 100% tax relief (AIA) is great news for businesses.

The timing of the expenditure is important to maximise the relief available. Unless your year end is 31 March, the rules are very complicated. With a year end that spans the date of change, it may be worth delaying some expenditure until the new rate comes in.

A company with 31 December year end is looking to spend £450,000 on plant and equipment. The example below shows the difference in tax relief where the timing of the expenditure is managed

 

£ £
31 Mar 2014 300,000 150,000
30 Apr 2014 150,000 300,000
Total Expenditure 450,000

450,000

  £

£

31 Mar 2014 250,000 150,000
30 Apr 2014 150,000 287,500
Total Tax Relief 400,000

437,500

 

 

Date: 28th March, 2014
Author: David Mansell

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