Annual Investment Allowance - Maximise the Reliefs Available

The Annual Investment Allowance ('AIA'), which gives up-front tax relief on investment in certain capital equipment, has been temporarily increased from £200,000 to £1m per annum for a two year period between 1 January 2019 and 31 December 2020.

This is great news for manufacturing and other capital intensive businesses looking to invest in their plant and equipment over the next two years as it means that any expenditure on qualifying plant and equipment such as machinery, but not cars, up to a maximum of £1m will attract 100% tax relief in the year that it is purchased. At current rates, this is the equivalent of up to a £190,000 reduction in corporation tax in the year.

Beware of the Traps

The timing of expenditure is key to maximising the reliefs available through AIA, as if investment is made without full consideration of this timing, some relief could be lost. Businesses need to be aware of the transitional rules that apply where an accounting period spans 1st January 2019 - the operative date of the increase.

What does this mean?

When it comes to AIA, timing is everything. With careful planning of the investment in new plant and equipment, these allowances can be maximized, hence projects should be assessed at an early stage and the relevant impact on cash flow understood. As an example, any Company with a 31 March 2019 year end will only be able to claim a pro rata percentage of the newly increased allowance (i.e. 9 months at £200,000 and 3 months at £1,000,000) so a maximum of £400,000 for that year. In the following year to 31 March 2020, the full AIA allowance of £1,000,000 would be available.

How can we help?

Armstrong Watson's tax team are vastly experienced in assisting businesses with their proposed investments in plant and machinery in order to maximize the AIA and other reliefs available on such investment.

Additionally our team can help you to identify funding required to enable the investment to be made if that may be something that is holding the investment back.

For further information please contact Richard Askew on 01900 310440 or email at

Contact Richard

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