Annual Investment Allowance

Clients adversely affected?

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Clients have been asking me to explain the implications of the temporary AIA increase. Relatively straightforward, or so I thought. Can anyone explain to me the rationale for restricting the allowance to the proportionate amount of the post 31 Dec 20 period? I fully get the idea that for periods straddling 31 Dec 18 businesses will be able to claim a minimum £200k because that is what they would always have been able to do, even if they'd spent £200k on 31 Dec 18. However, a business with a 31 Jan 21 year end, if it has not incurred expenditure up to 31 Dec 20, will be entitled to AIA of only £16,667. The obvious solution is to advise clients to make sure that they get the spend into the correct period, but it has also been suggested that businesses should be allowed to 'opt out' of the increased allowance, thereby allowing them to continue to claim £200k per year. Alternative would be to restrict expenditure in post 31 Dec 20 straddle periods to £200k.

Thoughts, anyone?

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By Duggimon
23rd Nov 2018 12:08

If it's going to have a significant effect you always have the option of moving the year end as well.

It's a faff, as it was every other time they changed the AIA. Thankfully the number of actual clients adversely affected are pretty small and there are ways to mitigate or remove the issues for those so affected.

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