Since January 2013, an annual investment allowance (AIA) has been available, providing businesses with a 100% deduction for qualifying capital expenditure. When the legislation was introduced, the allowance was set at £25,000. However, there have been a number of temporary changes to this limit including the temporary increase of £500,000 currently in place for qualifying expenditure incurred in the period from April 2014 to 31 December 2015.
From 1 January 2016, the AIA will be increased on a permanent basis from £25,000 to £200,000. Transitional rules will apply for any chargeable periods which straddle 1 January 2016.
Businesses looking to invest in a significant amount of qualifying plant and machinery may wish to accelerate this spend so that it falls with the higher threshold of £500,000, applicable up to 31 December 2015. Care will need to be taken with respect to expenditure incurred within the chargeable period straddling the change in allowances in order to maximise AIA availability.