Stevenage
01438 727141
Hitchin
01462 413249
Cambridge
01223 929150
Bedford
01234 639466
Hemel Hempstead
01442 503901

Business investment and the annual investment allowance

The AIA allows businesses to write off the full cost of qualifying expenditure and in recent years the amount allowed as a deduction for tax purposes has fluctuated wildly.

From January 2016, the annual limit for AIA expenditure has been set at a new permanent limit of £200,000. Accordingly, this is the amount that can be claimed for 2016-17.

AIA is generally available on a purchase of plant and machinery that can include:
  • Fixtures and integral features
  • The alteration of land for the purpose only of installing plant or machinery
  • Vans, lorries and motorcycles
Expenditure that would not qualify for AIA includes:
  • Motor cars
  • Expenditure which would not qualify for capital allowances such as on buildings or structures.
  • Plant and machinery which was originally used for another purpose, for example, items owned personally which are subsequently introduced into the taxpayer’s business.
  • Plant and machinery acquired in the final period of business before the cessation of trade.
Also, AIA is not available to:
  • Sole traders or partners using cash accounting as from 6 April 2013 as this has modified rules in respect of deductions for plant and machinery.
  • A partnership with a corporate partner which could be a company or an LLP.
This remains a generous tax allowance, as the full cost of qualifying purchases can be written off against trading profits before calculating any tax due.
Business owners should be advised that a claim for AIA in the final period of trading prior to cessation of trade would not be allowed.