Budget 2018: the chancellor has announced a temporary increase in the Annual Investment Allowance (AIA) to £1million.
The AIA limit will be increased from £200,000 to £1million for two years from 1 January 2019.
Transitional rules will apply where there is a chargeable period which spans the 1 January 2019, or 1 January 2021:
- Chargeable periods spanning 1 January 2019:
- The maximum AIA across the whole period will be pro-rated for the period subject to the £200,000 cap and the period subject to the £1,000,000 cap.
- In addition, only a maximum of £200,000 of that annual cap can be claimed in relation to expenditure before 1 January 2019.
- For example, for a 30 June 2019 year end, up to £200,000 can be claimed in relation to expenditure in the period to 31 January 2019, and a total of up to £600,000 (6/12 x £200,000 + 6/12 x £1million) can be claimed for the year to 30 June 2019.
- Chargeable periods spanning 1 January 2021:
- The maximum AIA is pro-rated for the period subject to the £1million cap and the period subject to the £200,000 cap.
- The maximum amount that can be claimed for the period 1 January 2021 to the end of the chargeable period will be the pro-rated amount of the £200,000 cap.
- For example, for a 31 March 2021 year end, the maximum AIA for the year is £800,000 (9/12 x £1million + 3/12 x £200,000). Only £50,000 can be claimed for expenditure between 1 January 2021 and 31 March 2021 (3/12 x £200,000).
Other transitional rules apply for groups of companies.
Useful links:
External link
HMRC: Temporary increase in the Annual Investment Allowance