Annual investment allowance for calendar year to 31/12/11
I have used £100,000 as the annual investment allowance available for my UK group in the tax return for year ended 31 Dec 2011.
The tax adviser has informed me that the AIA was reduced to £50,000 from 1 April 2010.
Could you please advise what the correct amount is for the period?
Many thanks
When were items purchased?
See the Business Link website for the AIA limits.
The calculations for AIA are based on two things.
Firstly, where the rate changes in the accounts year, you get the allowance in each period pro-rated for how much of the period falls within each rate. So, rounding to whole months for simplicity.
1 January 2010 to 31 March 2010 - 3/12 x £50,000 = £12,500
1 April 2010 to 31 December 2010 - 9/12 x £100,000 = £75,000
Your total allowance for the year is the combined amount, being £87,500. However, you then need to look at when you actually bought the items on which you want to claim the allowance. If all your purchases are in the period up to 31 March 2010 then you can only claim a maximum of £50,000 for those purchases (the maximum AIA in force at the time the purchases were made)
I have it on good authority that, with the reduced rate from 1 April 2012, the above calculations will work in reverse (i.e. AIA for purchases after 1 April 2012 will be limited to £25,000, regardless of the total AIA for the accounting period)
Your £100,000 of purchases appear to all be within a period where the £100,000 limit was in place so you should be OK.
Other way round - increased
Other way round - increased from £50k to £100k on 1 April 2010.