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Beat the tax allowance reduction and invest in your business

The annual investment allowance (AIA) was introduced in April 2008 as a tax incentive for investment in new equipment, machinery, etc.

It allows businesses, regardless of size, to deduct the full cost of plant and machinery (excluding cars) from their profits in the year of purchase. It was introduced as part of the wider Business Tax reform package which was intended to provide both an incentive to invest and a major simplification of the tax system for businesses, particularly smaller businesses. The AIA replaced the previous 50% or 40% first-year allowances for small or medium-sized enterprises.

The AIA is a kind of capital allowance which offers businesses 100% tax relief on qualifying expenditure. Prior to January 2013 the allowance stood at a mere £25,000 but was then subject to temporary increases from that date when it was raised to £250,000 and then doubled from 1st April 2014 to £500,000 to stimulate investment in plant and equipment as part of the Chancellor’s strategy to allow businesses to prosper as the UK emerged from recession. The 2015 Summer Budget announced that the AIA would reduce to £200,000 from 1st January 2016.

The general rule is that qualifying expenditure is expenditure on plant and machinery used in the business. ”Plant and Machinery” actually covers almost every sort of asset a person may buy for the purposes of his/her business and the only business assets not covered are land, buildings and cars. Typical examples of plant and machinery include: computers, office furniture and equipment, vans, lorries, trucks, cranes, diggers, shop fittings, tractors, tooling machines, wind turbines etc etc.

Bira Bank has a promotion on Equipment lending rates from 1st October to the end of December 2015 to further incentivise members who are considering taking the plunge on what can constitute significant outlay for them as the economy continues to grow(see below for details). Why not give one of the bira bank team a call to discuss your investment plans on an informal basis?