The annual investment allowance also referred to as the AIA, is a capital tax allowance that you can claim on assets which you have purchased for use in your business, such as equipment and machinery. The reason for the AIA is to ‘stimulate business investment in the economy’.
In March 2014, Chancellor George Osborne announced that starting from 1st April 2014, the AIA would be temporarily increased from £250,000 to £500,000 per year. As this was only a temporary increase, it was due to drop to £25,000 from 1st January 2016.
After announcing the March 2015 Budget, Osborne confirmed that the allowance will no longer be dropping to £25,000 but rather remain at a more generous amount of £200,000. This decision will be reviewed once again in the 2015 autumn statement.
You are entitled to claim an allowance on items that are used solely for your business. This is referred to as plant and machinery. The items include cars used for the business, costs of demolishing plant and machinery, parts of a building known as integral features and certain fixtures such as bathrooms.
Also included in the list of qualified expenditure is office and furniture equipment, business machines such as printers, lathes and tooling machines, computer hardware and certain qualified software.
If you are considering claiming an annual investment allowance, there are a few things to note down. Firstly, you can’t claim items that you lease for your business; you have to own them. As well as this, land and structures (bridges, roads, etc.), buildings (inc. doors, gates, shutters) and mains water and gas systems are not recognised in the allowance.
If you are a sole trader or partner and would like to claim on repairs, do so as a business expense. If you are a limited company, you should deduct the repairs from your profits as a business cost.