£1 million Annual Investment Allowance now extended to 1 January 2022

13 November 2020

Planning the timing of expenditure on fixtures, fittings, plant and equipment carefully can ensure clients make the most of the current temporary increase to Annual Investment Allowance (AIA) to claim a 100% tax deduction.

The 100% AIA amount for expenditure on plant and machinery (P&M) was temporarily increased from £200,000 to £1 million between 1 January 2019 and 31 December 2020, and was due to revert back to £200,000 from 1 January 2021 onwards. However, the government announced on 12 November 2020 that, to stimulate investment in UK manufacturing and support business confidence, the expiry date for the £1 million annual allowance will be extended by a further year to 1 January 2022.

The extension to the temporary increase of the AIA to 1 January 2022 is a welcome incentive to support and encourage businesses investing in plant and machinery, particularly during this uncertain period. By extending the limit for a further period, businesses can plan their capital expenditure over the next year to maximise the 100% tax relief available for qualifying expenditure.

It should be remembered that groups of companies are only entitled to one AIA between them, so it may be necessary to review the expenditure of the whole group to determine how best to use the allowance.

For further information or assistance in relation to capital allowances claims, please contact Steve Watts or Sean Alexander.

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