We would like to remind everyone that from 1st January 2016, the Annual Investment Allowance (AIA) has changed to £200,000 from £500,000. The AIA is the amount you can spend on capital items (fixed assets, as opposed to repairs and renewals) and get 100% tax relief on that expenditure. Any capital expenditure in excess of this limit only attracts tax relief at 18%.
However, the way the transitional rules have been structured means a business with a 31st March 2016 year end will have a maximum allowance of £425,000 for the 9 month period up to 31st December 2015, but no more than £50,000 capital expenditure would be eligible for AIA for the 3 month period to 31st March 2016.
For tax planning purposes, therefore, we need to consider whether to incur expenditure in the January to March 2016 period or delay to post 31st March 2016 to benefit from the new AIA of £200,000.
If you have an queries please don’t hesitate to get in touch with your usual contact at 360.
