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Countdown to Investment Allowance Drop!!


The Annual Investment Allowance (AIA) is a capital tax allowance that offers 100% tax relief on qualifying capital expenditure in the year of purchase.


There has never been a better time to invest in new ‘state of the art’ BOMAG machines as the AIA is set to drop by £300,000 at the turn of the year.


Since its introduction in 2008 there have been several changes in the allowance with the maximum potential tax relief changing from £25,000 to £500,000. However, in the 2015 Summer Budget the Chancellor announced his plans to support growth and investment for Britain's small and medium sized businesses when he declared that the AIA would be set at £200,000 per year from January 2016. Good news for the long term but if YOUR business is eligible for the benefit of up to £500,000, the clock is ticking!



How does the AIA work?
Currently, the first £500,000 of expenditure on business assets (including all types of construction equipment) per year is 100% allowable against taxable profits of a business deductible in the year that you buy them. This accelerates the tax relief rather than the reducing writing down allowances (WDA) normally applied over several years.


This allowance will reduce to £200,000 from January 2016 but the Chancellor indicated his desire for this to be fixed, year on year to help SME's plan and invest for growth. Any expenditure on business assets over the AIA limit would be applicable to the usual WDA's.


Who can claim?
AIA is available to most businesses, regardless of their size. The only exception of a business structure that cannot claim is those with a mixed partnership (for example, a partnership comprised of both individuals and companies) and Trusts.


What can you claim on?
Most assets purchased for business use qualify including all types and sizes of construction equipment.


Is purchase by Hire Purchase (HP) eligible?
Even if you finance your new investment by using HP you can benefit in the same way as buying outright and tax relief is also available on interest charged to the profit and loss account.


What difference will the change in the AIA maximum allowance mean?
Investment will be boosted in the long term with the AIA fixed at £200,000 per year from January 2016, meaning more businesses can plan for growth and investment and claim tax relief on investments in new plant and equipment.


CRITICALLY in the few remaining months of 2015 the clock is ticking if your business can benefit from the potential £500,000 tax relief, not the lower £200,000 figure that will apply from 2016.


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