The Annual Investment Allowance was introduced in April of 2008 to encourage business owners to invest more in their company. However, the amounts that can be claimed have altered over the years, making the scheme confusing at times.
Originally, the allowance was worth £50,000, but it was then increased to £100,000 in 2010. By April 2012, the amount had been reduced to £25,000, before then being increased to £250,000 in December 2012. In April 2014, the figure was raised further to £500,000, which is expected to last until 1st January, 2016. At that time the allowance is expected to be reduced to £25,000, although it is possible that this figure will be changed before then.
What can be claimed using the allowance?
Claiming allowances has always been a complex system, with some items eligible for one type of tax relief and restrictions on others. The Annual Investment Allowance can be used to claim the total expenditure on most plant and machinery, up to the limit for that particular year. If you have spent more than the scheme’s limit, you can claim Capital Allowances on the remainder of the investment.
What you can’t claim for
There are some restrictions on what can be claimed for, including the amount spent on a company car, which also has other types of allowances that can be requested. The grant must be claimed by a “qualifying person”, which is an individual, business, or partnership where all partners are non-corporate entities.
What is plant and machinery?
Just about all assets that are purchased for commercial use can be classed as plant and machinery. However, cars, buildings and land are exempt from the allowance. Any computers and office equipment, along with furniture, are eligible for the allowance, along with the fixtures of a building, such as in a bathroom or kitchen. Agricultural machinery and cranes, as well as lorries and diggers, are all eligible for the allowance. However, there are many more examples of assets that will qualify for Annual Investment Allowance, so it may be best to speak to an accounting service for small business.
Although it is believed that the rate of the Annual Investment Allowance will be higher than £25,000 in January, 2016, nothing has been confirmed at this time. However, business owners will need to know the exact amount of the allowance rate, so that they can discuss long-term capital investment plans with the provider of their accounting solution.
If you would like to discuss a future investment strategy, please call us today for further details.