The £1 million Annual Investment Allowance (AIA) has been extended, meaning businesses will be able to continue claiming a 100% deduction for up to £1 million of investment in qualifying assets (see below) up until 1 January 2022.

The allowance was initially increased from £200,000 to £1 million on 1 January 2019 and was due to end in January 2021.

This extension is intended to support business confidence throughout the COVID-19 pandemic, and stimulate investment in UK manufacturing.

What qualifies for the Annual Investment Allowance?

  • Plant and machinery
  • Costs of demolishing plant and machinery
  • Certain items of fixtures and fittings including fitted kitchens, bathroom suites, fire alarms and CCTV systems
  • Alterations to buildings to install other plant and machinery
  • Integral features (see below)

Integral features

  • Lifts, escalators and moving walkways
  • Space and water heating systems
  • Air conditioning and air cooling systems
  • Hot and cold water systems (but not toilet and kitchen facilities)
  • Electrical systems, including lighting systems
  • External solar shading

It is worth noting that amounts spent on integral features in excess of the £1m AIA will only qualify for a writing down allowance at a rate of 6%, in comparison to the 18% rate which applies to plant and machinery.

What doesn’t qualify?

  • Cars
  • Assets previously owned personally
  • Buildings, including doors, gates, shutters, mains water and gas systems
  • Land and Structures, for example bridges, roads, docks

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