Did you know that the Annual Investment Allowance (AIA), which allows UK businesses to deduct the entire value of qualifying capital expenditure from their profit for the year, has been doubled to £500,000 by HMRC?
Typically, when completing end of year tax computations, a business can take 18% of a company’s total plant & machinery pool value and deduct this from their annual profit to give them a reduced tax bill. Broadly speaking, plant & machinery covers all types of assets bought for business purposes, excluding land, buildings and cars. However, the AIA allows a business to deduct 100% of their qualifying asset’s value in the year of purchase.
Most companies throughout the UK are entitled to take advantage of the AIA, ranging from large limited companies to sole traders. However, according to the HMRC website, the doubling of the allowance is only temporary, and is likely to be reduced again after 31st December 2015. Therefore, companies interested in making investments for their business are encouraged to take advantage of the £500,000 allowance now, whilst it remains fixed at its highest amount. Careful planning on both the timing and volume of expenditure is required in order to gain the optimal tax allowances and here at Pursglove & Brown we have an expert team ready to advise you on the best course of action for your business.