Tax relief scheme to boost investment
22/10/2014 / Comments 0
A time-limited increase in Annual Investment Allowance is encouraging businesses to take advantage of the growing economy by investing in new equipment.
During the recession, many businesses put investing in new machinery on hold as they were struggling to make ends meet.
Unfortunately this means that now, as the economy is picking up, some businesses are unable to fully benefit from new business opportunities as they do not have the right equipment.
But, a time-limited increase in Annual Investment Allowance (AIA) is encouraging businesses to take advantage of the growing economy by investing in new tools.
The AIA is a type of capital tax incentive that offers a 100% allowance on qualifying capital expenditure in the year of purchase, capped at an annual amount.
In April this year, AIA was set at an increased value of £500,000 per year and will remain at this rate until 31 December 2015. In January 2016 it will return to £25,000 per year.
This incentive to invest can help cash flow as it rewards investment by speeding up the tax relief for expenditure, so that it can be claimed in the year of investment, rather than over a number of years.
This is good news for businesses that have been put off investing in new equipment in recent years, as it will allow them to purchase the tools required to grow with the economy and stay ahead of their competition.
But the timing of investment can be critical. Equipment bought on and after 1 January 2016 will be subject to the reduced AIA limit of £25,000. So it is important to plan your business expenditures carefully to make the most of this incentive.
In Q2 2014, business investment reached £45 billion – the highest level since 2005, according to the Office for National Statistics. Business investment showed an increase of an estimated £1.4 billion (3.3%) since Q1 2014 suggesting that many businesses are already taking advantage of the increased AIA allowance.
AIA is available to most companies, individuals and partnerships (excluding trustees or mixed partnerships). Qualifying expenditure covers most assets purchased for use by businesses, including: machinery, office furniture, computer hardware, vans, lorries, building fixtures and business machines.
Will your business be taking advantage of the increased AIA limit? Please share your views in the comments below.