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Capital Allowances – Annual Investment Allowance (“AIA”)

The AIA gives most businesses 100% relief for the capital cost of qualifying assets in the year in which they are bought.  The exception is partnerships with corporate members which do not qualify for the AIA.

The rate was due to be reduced to £25,000 from its current £250,000, but instead the Chancellor announced a temporary increase in the AIA.  The relief is now (from April 2014) worth £500,000 p.a. and is set to continue at this level until 31 December 2015.  This presents an opportunity to time the purchase of assets to maximise the available relief.

Where accounting periods straddle the date of change the period is split and the AIA claimed on a time apportioned basis.  Based on a year end of 30 September, this can be illustrated as follows:

 

Year to

30.9.14

Year to

30.9.15

Year to

30.9.16

From 1 October 2013 to 31 March 2014

£250,000 x 5/12
104,166    

1 April 2014 to 30 September 2014

£500,000 x 7/12
291,667    

1 October 2014 to 30 September 2015

£500,000
  500,000  

1 October 2015 to 31 December 2015

£500,000 x 3/12
    125,000

1 January 2016 to 30 September 2016

£25,000 x 9/12
      18,750
Total AIA £395,833 £500,000

£143,750

The rules on timing of spend and allowances available are complicated and if you are planning any significant spend in a year where the rates change please do get in touch for detailed advice.

 

 

Date: 18th June, 2014
Author: Cathy Corns

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