14/12/18

In a follow up to his recent blog on the new Structures and Buildings Allowance, Nick Muir considers the changes to the Annual Investment Allowance introduced in the recent budget.

I recently wrote about the new Structures and Buildings Allowance (“SBA”) and commented on how I hoped this might in some small way help address Britain’s poor productivity record.

I’ve now had the opportunity to look at some facts and figures on our productivity as compared to that of our rivals and it doesn’t make for good reading. According to the Office of National Statistics, in 2016 Britain had a productivity shortfall with the G7 of 16.3%.

The government’s recent report on Brexit said: “As the UK leaves the European Union it does so with strong economic fundamentals.” I’d beg to differ on that point.

So, another positive budget announcement from the perspective of increasing productivity investment) was the increasing of the Annual Investment Allowance (“AIA”) from its current limit of £200,000 to £1,000,000.

The AIA gives most businesses 100% relief on qualifying capital expenditure in the year it’s incurred. The rules on AIA are quite complex but most items of plant and machinery qualify though there are exceptions.

The new limit doesn’t come in until 1 January 2019 and will only be temporary, returning to £200,000 on 1 January 2021. There will be transitional rules which will affect the amount of AIA that can be claimed in accounting periods spanning these dates.

If you’re thinking of making a significant investment in capital expenditure it might be worth talking to us to see if there would be any benefit in deferring your capital expenditure until after 1 January 2021.

If you would like advice about claiming the Annual Investment Allowance, please give Nick Muir a call on 020 7625 4545.