A senior moment. Where two related companies have to share the AIA for a chargeable period, is the £200k for the notional period to 31 Dec 18 shared? In other words, with a 30 Apr 19 year end, total AIA will be £466,667. I am assuming that each company could not both claim up to £200k for the period to 31 Dec 18, with £66,667 left for the following period to 30 Apr 19?
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I am assuming the same as your assumption. The two companies have effectively one AIA, subject to the same calculations for splitting it between periods.
Also, is it not 8/12 of £200K for May - Dec 2018 then 4/12 of £1m for Jan - Apr 2019? It's still the £466,667 you've worked out but it means they're limited to £133K up to 31 Dec, not £200K.
I presume you know that since you've come up with the £466,667 but your question made it sound like you thought there was £200K available pre Dec 2018.
Are you sure about the AIA being limited to £133k?
As far as I'm aware the expenditure pre-Jan 19 can be up to the £200k limit in place for that period. The HMRC example seems to support this:
https://www.gov.uk/government/publications/temporary-increase-in-the-ann...
Oh smashing, thanks for that. I'm yet to have to use it so I thought it worked the same as the last time they did this, which was terrible.
Glad to see they've seen sense and sorted it.
I'm quite happy with my calculations - the total allowance for the period of account is £466,667 - being the 8/12 plus 4/12. But the cap on expenditure up to 31 Dec 18 is the full £200k (that is what they would have been able to claim in absence of the increase).
Conversely, though, when the allowance reduces again, the allowance in the period post 31 Dec 20 is restricted to the apportioned amount - an apparent anomaly which might leave some taxpayers worse off as a consequence of the temporary increase.
Agreed, I hadn't realised the method was different this time. I'm sure the last temporary increase saw some people worse off because of the timing of asset purchases.
And I'm sure I've seen technical updates that said the same thing would happen this time.
But FA2019 Sch13 and paras 1(3) and 2(3) confirm the position as Wolf and Wilson give it.
Glad to hear I may not have invented it, having looked it up now (which I should have done in the first place, and would have done had I done and 2019 accounts yet) I agree entirely that it is not the case and £200K is available in the period up to Dec 2018.
Another crazy idea.©
Why not calculate one time-apportioned AIA for the whole year, instead of having two completely separate periods within the one year ?
Does that give a different answer? If so, is that different answer somehow fairer?
Sch13 is simple and straightforward (giving them more time to deal with Brexit). It gives (what I think is) a fair outcome. It deals with Wilson's query/point in one para (3).
Try drafting it to achieve your alternative idea (or have you copyrighted that word?)
Capital expenditure, by its very nature, rarely comes evenly over the year. Try telling the farmer who's bought a £500,000 tractor in the wrong bit of the year that it's fair really, just a pity about that AIA that he can't use.
Which is why it is vital that accountants advise (and clients listen) on the impact of the changes.
The only difference that would make would be to allow businesses to spend over the AIA limit in 2018 and still claim AIA on it by carrying back the 2019 amounts. That is presumably counter to the point of the legislation.
It's also less fair, since the legislation came out at the end of last year, so businesses who could have made a decision to make use of the increased allowance missed out on opportunities to do so by not spending on assets they could have carried back allowances for.
Fairer to limit the extra AIA to 2019 and beyond, which is why we split the periods.
The effect is more marked when the AIA is reduced.
I don't agree with you but I accept that the concept of fairness is a subjective one.
I would go further and say that the effect may indeed be quite illogical when we return to £200k. A company with a year end of 31 March that spends nothing on plant until 31 March 2021 spends £200k on that date. It will be entitled to AIA of £50k only whereas were it not for the temporary increase to £1m it would have been entitled to £200k. Which is why, I understand, ATT mooted the possibility of electing out of the increase to £1m - which increase, let's face it, is unlikely to benefit the majority of clients of members here.
Thanks all. With the benefit of the responses and a strong cup of coffee I've resolved the issue in my own head. If my assumption had been incorrect then, with company A having actually spent £180k to Dec 18 and company B £210k to Dec 18 a total claim of £380k might have been possible - £180k more than would have been available were it not for the change. So, yes, the £200k does need to be shared.