The annual investment allowance (aia)

What is the annual investment allowance (AIA)’

The annual investment allowance (AIA) is a form of tax exemption for British business, which are used to purchase commercial equipment. The AIA allows you to deduct the total amount of qualifying capital costs up to a certain limit from your taxable income in this tax year. The allowance allocated to purchase equipment in the first place, tools and machines .

Breakdown of the annual investment allowance (AIA)’

The annual investment allowance (aia) was introduced in 2008 to encourage businesses to invest in plants and equipment to stimulate economic growth. One of the main motivations of this benefit is that it contributes to the rapid relief of taxes, since all expenditure can be claimed in the year of purchase, and not a few years.

The right to receive the AIA

The allowance may be claimed by companies and individual entrepreneurs. The partnership is also entitled to the AIA, provided that the partners are individuals. Individual entrepreneur or partnership members with more than one business as a General rule, qualify for the annual investment allowance for each business, if the enterprise working for the same company and/or such events. In cases where one person is under the control of two or more companies, these companies are only entitled to one AIA between them, and can choose how to distribute this benefit.

Changes in the amount of the AIA

Since its inception, the level of expenditure that can be claimed under AIA have undergone several changes. Expenditure was increased to £100,000 in 2010 from £50,000 in 2008. From April to December 2012, it was reduced to £25,000, after which he was subsequently raised again in January 2013 to a level of £250,000.

From April 2014, a temporary measure was introduced, which doubled the previous amount to £500,000 until December 2015. The intention was that after this period, the level will return to its previous low point of £25,000. However, in July 2015, the UK government announced that the AIA will be set at a constant level of £200,000.

Capital costs that it is entitled to the AIA

Most assets acquired for commercial purposes may be claimed as a qualifying expenditure for the MPa, with the primary category listed below:

  • Office equipment, including computer hardware and certain software, and office furniture
  • Part of the building, called the integrated features
  • Certain adaptations such as air conditioning, an equipped kitchen, or bathroom
  • Trucks or vans used for moving targets
  • Machines used for commercial purposes
  • Farm equipment, including tractors
  • Machines used to provide entertainment, such as arcade game machines

Assets that cannot be claimed include buildings, machinery, land or buildings, such as bridges and docks, and items used solely for business entertainment. Part of the cost of vehicles used for business purposes can be deducted, but not within the AIA. The exception to this rule for cars-these are cars used by driving schools, which must be adapted to have dual control, and as such can be claimed via AIA.

Hm revenue and customs (hmrc) gives detailed guidance on claiming the annual investment allowance capital allowances for plant and machinery Toolkit.

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