If your business is making ongoing investments to adjust to the Covid pandemic, you may be cheered to learn that the current £1m Annual Investment Allowance (AIA) will be available for another year.
The increased AIA allowance was due to finish on 31 December 2020 and return to its previous level of £200,000, but will now continue for another calendar year until December 2021. This means that businesses that spend up to £1m on assets that qualify as plant and machinery, will benefit from full tax relief in the year of purchase, rather than receiving tax relief spread over a number of years.
Key details and dates to remember
- AIA has been £1,000,000 from 1 January 2019 and will now apply until 31 December 2021.
- AIA may return to £200,000 on 1 January 2022.
What counts as capital expenditure?
Examples of assets that qualify as plant and machinery and would therefore be eligible for AIA includes:
- Office furniture
- IT equipment
- Certain fixtures including fitted kitchens, bathroom suites, fire alarm and CCTV systems;
- Vans;
- Integral building features e.g. electrics, plumbing, air conditioning, heating;
- Safety fixtures and adaptations to make a business Covid safe;
For companies that are grouped, the AIA allowance of £1m needs to be shared amongst the group, but it can be allocated in the way that is most advantageous to the group. If total expenditure exceeds the AIA , capital allowances are available on the balance at the usual writing down allowance rates of 18% and 6%, depending on the nature of the expenditure.
If you would like some advice on claiming for capital allowances, please contact partners@rjp.co.uk.