Annual Investment Allowance Change

The Annual Investment Allowance (being the amount a business can deduct for tax relief on capital purchases in the year of expenditure as opposed to obtaining the tax relief over time) is being reduced from £100,000 per annum to only £25,000 per annum. The effective date of the change is 6 April 2012 for unincorporated businesses and from 1 April 2012 for companies.

In order to avoid complications, if your year end is different from the end of the tax year (31 March 2012 or 5 April 2012) you should make your investment during the trading year that ends in the fiscal year 2011-12. For example if your year end is December you should invest before 31 December 2011. If your year end has already passed then you should still make your purchase prior to 31 March 2012 or 5 April 2012 where possible.

A list of the types of assets that are covered by the AIA relief include:

• Tools and equipment
• Computers
• Office equipment and furniture
• Computerised machinery
• Vans and lorries for business purposes
• Capital expenditure on computer software
• Integral features of a building, such as electrical systems

Items which do not qualify as plant and machinery for AIA include:

• Cars
• Walls, floors, doors, windows and stairs

Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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