Newsletter Autumn 2015

Annual Investment Allowance

This annual allowance (AIA) is set against your expenditure on business equipment, and allows you to claim 100% of the cost in the year of purchase. Most categories of equipment qualify, including many fixtures in buildings and commercial vehicles, but cars are excluded.

The AIA has been set at £500,000 since April 2014, but it will reduce to £200,000 on 1 January 2016. This is a very high level for an annual allowance, but you need to time any large purchases very carefully as any unused allowance can't be carried into another accounting period.

If your accounting period straddles 31 December 2015, and you want to buy an expensive piece of equipment in that period, ask us to check the timing to ensure you are not disadvantaged by the transitional rules. For example, if your accounting period is the year to 31 March 2016, the maximum AIA limit is £425,000 for the year; but if the expenditure is all incurred after 31 December 2015 the AIA limit will be restricted to only £50,000. It may be possible to avoid this potential pitfall by taking advice now.