As noted in my last blog on 22 October, the AIA was due to reduce to £200,000 per annum from 1 January 2021. In a welcome update, the Treasury has announced that they are going to extend the £1m Annual Investment Allowance (‘AIA’) cap by a further year to 1 January 2022.
The extension is obviously welcome for those with significant CAPEX projects and plans afoot and should help with cash-flow management if properly planned. Financial Secretary to the Treasury Jesse Norman said:
“It is vital that we support business through the difficult months ahead. Extending the Annual Investment Allowance’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.”
In my last blog I provided an example of how the AIA is calculated when your accounting period spans the date on which the relief changes. This is still worth considered where you are forecasting longer term or future CAPEX plans which involve an accounting period that spans 1 January 2022. There is no guarantee that the Treasury will extend the £1m cap again, however Budgets and further announcements in 2021 should hopefully provide some clarity.
If you are planning on incurring significant capital expenditure in the near future, we can advise you on how to optimize the potential tax relief available. To discuss, please contact our tax director, Robert Barrie on 0141 221 2984 or email firstname.lastname@example.org.
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You may also wish to visit our capital allowances page which provides further detail of how we might help you save tax.