Thinking of purchasing new plant or machinery this year?
The Annual Investment Allowance (AIA) was originally introduced in 2008, and gives businesses a way to claim tax relief on some assets. If you buy plant and machinery for your business, the AIA allows you to deduct the cost of the asset from your profit for that year before working out how much tax you’re due to pay on that profit.
At the beginning of 2019, the government increased the AIA to £1 million for 2 years. This measure was implemented to help businesses grow by ensuring faster tax relief for plant and machinery investments (ranging from £200,000 to £1 million) and also, to stimulate business investment in the economy by providing an increased incentive for businesses to invest in new plant or machinery.
Assets that are eligible for the AIA include:
Vans or lorries used for moving purposes
Machinery
Office equipment
Some building fixtures
CCTV systems and fire alarms
Integral features to your business premises
Assets that aren’t eligible for the AIA include:
Cars
Buildings
Land
Anything you lease through your business (you must own the item to claim AIA)
Assets given to your business that you didn’t pay for
Assets that you owned for another reason before you started using them for your business
Whilst purchasing brand new machinery or replacing faulty equipment isn’t always something you plan for, timing other major investments is crucial to maximising tax relief, particularly if you are a sole trader or partner, where tax rates are more punitive.
Charles & Dean encourage our customers to make the most of this temporary AIA increase before it is reduced again at the end of 2020. Please get in touch before the end of your tax year, if you are thinking of investing in new plant or machinery.