The Annual Investment Allowance - the story so far ...
The ‘annual investment allowance’ (AIA) was introduced from April 2008 (1 April for corporation tax and 6 April for income tax) to provide a 100% allowance on the first £50,000 of expenditure on plant and machinery (other than cars). It replaced the first-year allowances regime for small and medium-sized enterprises.
What lessons can be learned so far?
The real problem is that for accounting periods straddling April the position is complicated! The key issues are:
1. When was the expenditure incurred?
2. What amount of AIA is available on a time basis?
3. Against which assets should the AIA be claimed?
4. What about the interaction with short-life assets?
Is it equitable that identical transactions can be taxed very differently according not only to the date expenditure is incurred but also because of different accounting dates?
Date: 4th March, 2009
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