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The Annual Investment Allowance

  • From 1 January 2016, the AIA was reduced to £200,000 per year.
  • Connected companies are only entitled to one AIA between them.
  • The companies can decide between them how to allocate that one AIA.

Connection for AIA means any of the following, where applicable at the end of a subsidiary’s chargeable period:

  • Parent company (P) holds more than 50% of voting rights of subsidiary (S)
  • P is a member of S and can appoint or remove the majority of S directors
  • P has the right to exercise, power to exercise, or does exercise a dominate influence of S
  • P is a member of S and by some agreement with other shareholders controls the majority of the voting rights in S

A person (A) controls two or more companies (C1 and C2) and C1 and C2 are related to one another at the end of C1 and/or C2’s chargeable period: C1 and C2 are connected

Control means by majority of:

  • shares held
  • voting power or
  • by any other power conferred by some other document.

Related means the following:

  • C1 and C2 carry on qualifying activities from the same premises at the end of the relevant chargeable period, or
  • More than 50% of both C1 and C2 turnover derives from similar activities.

What's New?

Following an announcement at Budget 2018, Finance Act 2019 includes legislation to temporarily increase the AIA to £1million for two years from 1 January 2019.

Small print

The rules on Annual Investment Allowance, including restriction for connected parties are included in Chapter 5, section 51A et seq of the Capital Allowances Act 2001.