The Annual Investment Allowance (AIA) for expenditure on plant and machinery is £1 million. This was a temporary rate which was set for the period 1 January 2019 to 31 December 2020, after which the rate was planned to revert back to £200,000.
The Government, however, has just announced that they are extending the £1 million limit to 31 December 2021.
This gives businesses an extra year to purchase any expensive plant or machinery and claim the full 100% annual investment allowance on it – ideal if you have had to hold off on significant investment decisions due to the uncertainty caused by Covid-19.
The AIA limit will revert back to £200,000 on 1 January 2022. For year ends which straddle 31 December 2021, the Annual Investment Allowance will be pro-rated and so you will receive more than the £200,000 but not the full £1 million.
There are complex transitional rules which mean the date of purchase is important.
If you are considering making a large purchase of plant or machinery, which you believe may qualify for the allowance, please contact one of our corporate tax team members to discuss the best timing to ensure the most beneficial use of the allowance.