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)
- 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?
- Assets previously owned personally
- Buildings, including doors, gates, shutters, mains water and gas systems
- Land and Structures, for example bridges, roads, docks
Our team of dedicated tax specialists can provide a tailored approach to tax affairs. We can help you navigate the complexities governing taxes, making them easier to understand and beneficial to you, get in touch with a member of our team today.