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The Annual Investment Allowance

  • From 1 January 2016 (to 31 December 2018), 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 of one or both of the companies, or
  • More than 50% of both C1 and C2's turnover derives from similar activities. This means within the same NACE classification (European classification of economic 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.


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