If expenditure on plant and equipment qualifies for the Annual Investment Allowance (AIA) 100% of the cost can be written off against taxable profits.
The amount that can be written off as AIA expenditure has changed a number of times in the past few years.
- Immediately before 31 December 2012 the (AIA) was set at a maximum spend of £25,000.
- From 1 January 2013 the £25,000 limit was increased to £250,000 for a temporary period of two years to 31 December 2014.
- The Budget 2014 has increased the limit again, to £500,000 from 6 April 2014 (for unincorporated businesses) and 1 April 2014 (for companies). This further, temporary increase will end 31 December 2015 when it is assumed the limit will return to £25,000.
According to the Office for Budget Responsibility the increase to £500,000 will bring forward business investment decisions amounting to £1bn, from 2016 and 2017 to 2014 and 2015.
Readers who are contemplating significant business investment in plant and machinery should seek tax advice before making any buy decisions. Depending on your accounts year end date, the amount of tax relief you may qualify for may be reduced if the date straddles the 1st or 6th April 2014.