The Annual Investment Allowance (AIA), introduced in 2008, stands as a significant tax relief measure. Under the AIA, qualifying expenditures related to plant and machinery can be fully deducted from profits before tax.
This valuable allowance is accessible to individuals, partnerships, and companies engaged in a trade, profession, vocation, UK non-residential property business, or furnished holiday lets. Notably, AIA eligibility excludes partnerships or trusts featuring a combination of individuals and companies within their business structure.
Remarkably, one element that endured from the challenged Growth Plan of 23 September 2022, was the permanent establishment of the temporary AIA increase from £200,000 to £1 million. The transitional rules that formerly applied to chargeable periods spanning 1 April 2023, have been discarded, given they are no longer required.
The AIA encompasses a broad spectrum of business-acquired assets, including machinery, tools, vans, trucks, construction equipment, office fixtures, and computers. However, cars fall outside the AIA’s scope.
To claim the AIA, the application must align with the purchase period of the item. This period is defined as the date when a contract is signed (if payment is due within 4 months of contract signing), or the actual payment date if it’s due more than 4 months later.