The Annual Investment Allowance for Businesses has changed

Image of two people reviewing documents and cashImage of two people reviewing documents and cash

In a move designed to encourage economic business investment and encourage businesses to invest in modern plant or machinery, the Annual Investment Allowance for Businesses has seen a temporary but significant five-fold increase to £1m for the period between the 1st of January 2019 and the 31st of December 2020.

The Annual Investment Allowance allows the business in question to claim 100% tax relief in the year of purchases and this year’s increase sees the allowance at its highest level for over a decade meaning now is an ideal time to seriously consider investing in new machinery. Paying for any new assets outright isn’t necessary to enjoy the benefits of this rise in allowance, the cost can still be financed and claims can be made for the full allowance up to the end of 2020 when the allowance will revert back to a significantly lower level for 2021.

The measure is expected to provide much faster tax relief for plant and machinery investments between £200,000 and £1m and is designed not just to help businesses invest but also to promote growth as well as the many other benefits that come with using modern machinery such as improved automation, increased productivity and lower energy costs and emissions.

While you cannot claim the Annual Investment Allowance for cars or plant and machinery you lease, there are a wide range of things that are eligible such as items you keep to use in your business, fixtures including kitchens and suites and integral features such as electrical systems.

As mentioned above this significant increase comes with a limited time span of two years so any plans for future investment in machinery for your business should coincide with the limited time of this rise in allowance. Allowing you and your business to take full advantage and reap the rewards before the end of 2020.

A word of caution though; give careful consideration to your accounting periods, if they fall either side of the dates on which the allowance will change then the current allowance and the new allowance will need apportioning in order to calculate your maximum qualifying expenditure as the allowance itself is apportioned on a calendar basis.

As with all things financial, we strongly recommend that speaking to your accountant or accounting department for advice and clarification is always best practice, to see how you and your business can take full advantage of this temporary opportunity.

For help and advice on our range of machinery get in touch today.

Published 5th July 2019