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AlA – £1m limit ends soon

The Chancellor picked out business investment as his preferred give-away to the business sector in his Autumn Budget 2018. The AIA Annual Investment Allowance (AIA) was increased from 1 January 2019 to £1m from the present base level set some years ago of £200,000. The increase was only due to be available for two years, until 31 December 2020. At that date the AIA will presumably return to the £200,000 limit.

The AIA allows business to 100% of the cost of acquiring qualifying business assets against tax on business profits.

For profitable companies, sole traders and qualifying partnerships this is a generous tax break.

The AIA is available for most allowable plant and equipment purchases.

Allowable expenditure includes:

  • Items that you keep using in your business, including commercial vehicles and cars if they are working assets, for example taxi cabs or driving school dual control vehicles
  • Costs of demolishing plant and machinery
  • Parts of a building considered integral, known as ‘integral features’
  • Some fixtures e.g. fitted kitchens or bathroom suites
  • Alterations to a building to install other plant and machinery but note that this doesn’t include repairs.

The AIA is not available for purchases of:

  • Cars that are not working assets
  • Items you owned for another reason before you started using them in your business
  • Items given or donated to you or your business.

Whether or not businesses will be more encouraged to invest based on this additional tax break is another matter.

If you are considering take advantage of this £1m tax allowance it’s important that you consider the return on investment considerations and costs of funding alongside the possible reductions in your tax bill before signing on the dotted line.

If you need further advice on the Annual Investment Allowance contact us today at THP Chartered Accountants, with offices in CheamChelmsfordWanstead, and Saffron Walden.

Avatar for Jon Pryse-Jones
About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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