Claiming capital allowances

Businesses and owners of commercial property planning major capital purchases, take note.

The temporary increase to the Annual Investment Allowance (AIA) limit is set to continue for another year.

The AIA limit rose to £1 million two years ago, and was due to revert to £200,000 from 1 January 2021. But to stimulate investment, the £1 million limit now remains until 31 December 2021. The AIA gives 100% same-year tax relief for most qualifying capital expenditure on plant and machinery, up to a fixed limit. Relief for cars is given by other means.

To maximise tax relief on capital expenditure, the small print is critical: and timing of purchases and sales of capital assets particularly important. When the rates of AIA change, the amount of AIA available depends on your accounting period, as well as the amount and timing of the expenditure. Looking towards the end of the year, when the £1 million limit expires, special care will be needed. The message is that any substantial capital expenditure would be better made before 1 January 2022, and bespoke calculations will be needed for businesses with accounting periods spanning this date. We are always on hand to compute the capital allowances available to your business and make sure the most advantageous claims are made.