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How to make the most of the Annual Investment Allowance

From January 1st 2016 the Annual Investment Allowance (AIA) is going to permanently increase from £25,000 to £200,000. Therefore, if you are thinking about capital investment for your business we could help you take advantage of the full tax relief that is on offer.

Proposed revisions

Legislation will be introduced in Summer Finance Bill 2015 to increase the permanent AIA limit to £200,000 from 1 January 2016.

Where a business has a chargeable period that spans 1 January 2016, the maximum allowance for that business’s transitional chargeable period comprises 2 parts:

(a) the AIA entitlement, based on the temporary £500,000 annual cap for the portion of the period falling before 1 January 2016
(b) the AIA entitlement, based on the £200,000 cap for the portion of the period falling on or after 1 January 2016.

Example

A company with a 12 month chargeable period from 1 April 2015 to 31 March 2016 would calculate its maximum AIA entitlement based on:

(a) the proportion of the period from 1 April 2015 to 31 December 2015, that is, 9/12 x £500,000 = £375,000, and
(b) the proportion of the period from 1 January 2016 to 31 March 2016, that is 3/12 x £200,000 = £50,000.

The company’s maximum AIA for this transitional chargeable period would therefore be the total of (a) + (b) = £375,000 + £50,000 = £425,000, although in relation to (b) (the part period falling on or after 1 January 2016) no more than £50,000 of the company’s actual expenditure in that part period would be covered by its transitional AIA entitlement.

The tax relief on offer here can help you save thousands whilst still investing into your business. To find out how it can help you, feel free to contact us.

Or for more information visit: https://www.gov.uk/government/publications/annual-investment-allowance-permanent-increase-to-200000/annual-investment-allowance-permanent-increase-to-200000

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