Reduced AIA limit comes into force

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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.

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About Robert Lovell

Business and finance journalist


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    30th Mar 2012 16:33

    Thanks for the pointer

    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.

    Thanks (0)
    By plummy1
    30th Mar 2012 17:53

    Not convinced by the Governments Argument

    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

    Thanks (0)
    02nd Apr 2012 11:55

    AIA and small business

    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.

    Thanks (0)
    By nickja
    to Euan MacLennan
    02nd Apr 2012 13:43

    AIA and small business

    Here, here!

    Thanks (0)
    By plummy1
    02nd Apr 2012 20:22

    AIA and small business

    Very good point.

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