100% First Year Allowances
Annual Investment Allowance
The Annual Investment Allowance (AIA) is effectively a 100% first-year allowance for business expenditure on almost all plant or machinery (apart from cars). It is available to companies, individuals and most partnerships.
The 2012 Autumn Statement temporarily increased the AIA from £25,000 to £250,000 p.a. for two years effective 1st January 2013 and subject to transitional rules for expenditure between 1st January 2013 and 31st March 2013 depending on the taxpayer’s period end.
In the 2014 Budget the government increased the Annual Investment Allowance from £250,000 to £500,000 and also extended the AIA to the 31st December 2015 as part of the Finance Act 2014.
In the 2015 Summer Budget the goverment changed the level of the Annual Investment Allowance from £500,000 to £200,000 from 1st January 2016 for the duration of the current Parliament.
Enhanced Capital Allowances
Enhanced Capital Allowances enable building owners to claim for up to 100% of the cost of certain qualifying items against business profits in the year of purchase which can deliver a helpful cash flow boost and a shortened payback period.
First-year allowances of 100% are currently available for expenditure on certain energy-saving and water efficient equipment if the item appears on a specific list of qualifying equipment. Examples are, air conditioning systems, boilers, sanitary fittings. The list is far more comprehensive than this and can be viewed here.
Enhanced Capital Allowances are available for Income Tax e.g. self-employed, a partnership or sole trader, or Corporation Tax as a company or organisation. For Example £100,000 of air conditioning plant generates a tax saving of £40,000 in the year of expenditure for a 40% taxpayer or correspondingly £20,000 of tax saving in the year of expenditure for a company paying tax at 20%. However, the benefit to the taxpayer is not only the tax relief but also lower future energy bills as by definition all plant included on these lists is more efficient than plant not included on the lists.
Research & Development Allowance
RDA gives relief for capital expenditure on research and development incurred by a trader. Allowances are only due if the research and development is related to the trade that the trader carries on. The allowances are very generous because the rate is 100%.
RDA is only available to traders. A person carrying on a profession or vocation is not entitled to them.
If you would like to find out more about how Capital Allowances could save your business money; call us on 01423 567818, or click here to make an enquiry.