Annual Investment Allowance - financial year straddling tax years

Annual Investment Allowance - financial year...

Didn't find your answer?

Looking at December 2010 year end so my understanding is that the limit for the year is approximately 3/12 of £50,000 to March and 9/12 of £100,000 from April.  (Adjusted to daily basis - total is £87,672).

I would have expected to compare actual expenditure in the parts of the year to the above figures.

However, I have seen examples showing £50,000 claim to March 2010 or £87,672 from APril to December 2010.  IRIS tax accepts these figures.

So - is the situation basically that you can claim £50,000 for the first 3 months and up to £37,672 - subject of course to having qualifying expenditure of at least that amount.  Also that it is not necessary to take any account of when in the financial year expenditure took place.

Thanks to all who respond.

Ian

Replies (4)

Please login or register to join the discussion.

avatar
By PennyC
07th Feb 2011 15:33

You are not quite correct - but pretty close

Yes, the maximum allowance available for the year is £87,672. But you cannot claim on expenditure incurred before 1 April 2010 to the extent that it exceeds £50k. Contrary to what you suggest, therefore, the timing of the expenditure is important. Spend £50k in the first 3 months, and £37,672 in the following 9 months and you will get maximum allowance. Likewise if you spend anything less than £50k in the first quarter with the balance in the following period (eg you would get full allowance if you spent all of the £87,672 in the second 9 months). But spend more than £50k in the first quarter, and your allowance will be restricted.

Thanks (0)
avatar
By Cirius di Lemma
08th Feb 2011 11:01

Is that right Penny?

You seem to be suggesting that the spend in the first three months must be limited to £50k.

My understanding was that the actual level of expenditure is unimportant, but that it is the amount of expenditure on which the taxpayer claims AIA that is important, and the taxpayer is entitled to choose which expenditure they can claim AIA on.  So:

In the three months ended 31st March, they can spend as much as they like, but can only claim AIA on £50k of expenditure.

In the nine months ended 31st December, they can spend as much as they like, but can only claim AIA on the £88k of expenditure, subject to an overall maximum AIA claim of the £88k for the whole year.

Thanks (0)
avatar
By PennyC
08th Feb 2011 11:26

Yes, it is right

But not particularly well-worded!

Yes, the amount of actual expenditure is unaffected by the £50k and £100k limits.

I was thinking about the hypothetical case where there is expenditure of £87,672. If more than £50k of that was incurred before 1 April 2011, allowances would be restricted (AIA on £50k, WDA on the balance - rather than AIA on the whole lot if excess expenditure over £50k deferred until after 31 March 2011). Or indeed any case where planned expenditure exceeds £50k - to maximise allowances, no more than £50k should be spent, if possible, before 1 April 2011.

Thanks (0)
avatar
By Cirius di Lemma
08th Feb 2011 12:37

Agreed.

Just wanted to check that my understanding in an "after the fact" situation was good.  I thought you were considering allowance maximisation but wasn't 100% sure. Thanks.

Thanks (0)