Budget 2014 – Increase in the Annual Investment Allowance
The Chancellor will have pleased many businesses with his announcement that the temporary increase in the Annual Investment Allowance (AIA) is to be extended for a further year to 31 December 2015. From 1 April 2014 the maximum amount of the AIA is to be doubled to £500,000 for Corporation Tax and from 6 April 2014 for Income Tax.
The AIA was first introduced in 2008 and is designed to give 100% first year tax relief for qualifying expenditure on plant and machinery. It can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.
It is important that businesses are aware of the opportunities for making the most of the £500,000 limit whilst it is available. Businesses thinking of incurring large items of capital expenditure over the coming months should ensure that any purchase is timed to take proper advantage of the increased AIA limit.
The Chancellor said that ‘almost every business across Britain will pay no upfront tax when they invest in the future’. This measure is also expected to provide encouragement for businesses to increase or bring forward capital expenditure on plant and machinery.