Reduced AIA limit comes into force

From next week the annual investment allowance (AIA) will reduce to £25,000 per annum for all businesses incurring expenditure on plant or machinery.

The measure will have effect from 1 April for businesses liable to pay corporation tax, and 6 April 2012 for businesses within the charge to income tax.

This means, as per Rebecca Benneyworth’s explanation in the Sage Budget Analysis Report, that the requirement to deal with capital allowances will be removed - indeed for most of the affected businesses the AIA of £25,000 would cover all of their capital expenditure.

Continued...

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Comments

Hold on a minute...

Ardeninian | | Permalink

...aren't we getting a little ahead of ourselves?

When did cars start to qualify for AIA?

Aren't Rebecca's comments in the report about the proposed simplifications for small businesses?

TaxManDan

John Stokdyk's picture

Thanks for the pointer

John Stokdyk | | Permalink

Article has been amended to reflect your clarification.

While you are correct in saying that cars cannot qualify for AIA, you can get 100% capital allowances for new cars with very low carbon dioxide emission.

Now that you mention it, this would be a very good topic for clarification after all the changes in the past two Budgets. Thanks for highlight the misstatement, and for alerting us to a new area for potential coverage.

plummy1's picture

Not convinced by the Governments Argument

plummy1 | | Permalink

As somebody involved in capital allowances claims on commercial property I'm not convinced by the argument that this reduction will only affect larger companies. If a small company wants to buy premises and ensures a capital allowances claim is carried out while the tax return remains open for amendment then they could well have a claim for plant and machinery well in excess of £25,000. 

Problem is when people think about plant and machinery they are usually considering larger pieces of equipment rather than the heating systems, cold water systems or sanitary wear etc in a commercial property. I think reducing the AIA and the WDA contradicts the Governments stated intention to try and fuel growth in the economy. I'll stop there before I get too political.

John Plumridge

jon_griffey's picture

AIA and small business

jon_griffey | | Permalink

I cannot understand the logic of "smaller business will be less likely to be adversely affected by the reduction in the AIA than larger businesses".  For a large business an AIA of 100K is probably a drop in the ocean anyway.  One forgotten group seems to be capital intensive small businesses like hauliers and coach operators, where a new vehicle can cost £250K.  Typically these companies will have a small pool because of years of AIA and FYA and are now stuck between a rock and a hard place.  They cannot buy assets because they will not get AIA and they cannot sell because they get a balancing charge.  Expect a lot of business failures in these sectors.

AIA and small business

nickja | | Permalink

Here, here!

plummy1's picture

AIA and small business

plummy1 | | Permalink

Very good point.