Annual Investment Allowance (AIA)
Currently the AIA gives a 100% write off on most types of plant and machinery costs, but not cars, of up to £200,000 per annum from 1 January 2016. Special rules apply to accounting periods straddling January 2016 when the amounts of available AIA changed.
Any costs over the AIA will attract an annual ongoing allowance of 8% or 18% depending upon the type of asset.
Clearly where full relief is not obtained in the initial period there will be further tax relief in subsequent years but maximising tax relief early has an important impact on tax cash flow.
Please contact us for further advice if you have any plans for new plant and machinery purchases. The timing and method of such acquisitions may be critical in securing the maximum 100% entitlement available.
In addition to the AIA all businesses are eligible for a 100% allowance, often referred to as an enhanced capital allowance, on certain energy efficient plant and low emission cars.
The tax allowance on a car purchase depends on CO2 emissions. For purchases from April 2013 cars with emissions of up to 130 grams per kilometre (g/km) attract an 18% allowance and those in excess of 130g/km are only eligible for an 8% allowance.