Autumn Budget 2018 – Capital allowance changes with effect from 29 October 2018 and onwards

AIA Limit

On or after 1 January 2016 the AIA limit was permanently increased to £200,000.  Where an accounting period of the business is more or less than 12 months long, the AIA will need to be proportionately reduced or increased.

Special rate allowance

Plant and machinery such as cars with a high CO2 emission or integral features is currently written down at 8% per annum on a reducing balance basis.

Expenditure on energy-saving plant and machinery

100% first year allowance has been made available since 1 April 2001 for certain expenditure incurred on energy saving or environmentally beneficial technologies.  The first year tax credits came into effect on 1 April 2008 to encourage loss making companies to invest as well.  The autumn budget 2017 extended the allowance and tax credit up until 31 March 2023.

100% FYA for electric charge points (unused and not second-hand)

Originally introduced on 16 November 2017, with effect from 23 November 2017 and for periods to 31 March 2019 for corporation tax and 5 April 2019 for income tax.

Increase in AIA

The permanent AIA will be temporarily increased to £1 million from 1 January 2019 to 31 December 2021.  The maximum AIA limit will need to be time apportioned using the number of months in the accounting period before and after 1 January 2019.  The maximum expenditure incurred on or after 1 January 2019 claimable under AIA will be restricted to the time apportioned AIA limit (no. of months of accounting period post 1 January 2019 x £1m).

Special rate allowance

The writing down allowance will be reduced to 6% with effect from 1 April 2019 for corporation tax and 5 April 2019 for income tax.

Expenditure on energy-saving plant and machinery

Enhanced capital allowances and first year allowance tax credits will end on 1 April 2020 for corporation tax and 5 April 2020 for income tax on expenses incurred on certain energy technology and water technology.  The Energy Technology List and Water Technology list that qualify for FYA will be updated and included within the statutory instruments in 2019.

FYA and first year tax credits will continue for other qualifying assets.

100% FYA for electric charge points (unused and not second-hand)

4-year Extension of the relevant period when expenditure is incurred to 31 March 2023 for corporation tax and 5 April 2023 for income tax.

Businesses should consider whether expenses incurred should be postponed until on or after 1 January 2019 to take advantage of the increased AIA limit.  Care should be taken to calculate the maximum AIA limit where accounting periods straddle 1 January 2019.