The AIA is a form of Capital Allowance that offers a 100% allowance on qualifying capital expenditure in the year of purchase. AIA was introduced in 2008 since then there has been several changes, in the last budget statement the Chancellor announced that the AIA limit would increase temporarily from £200,000 to £1m per annum with effect from 1st January 2022 until 31st March 2023.
This is an important tax incentive which accelerates the tax relief so that 100% may be available in the first year, instead of claiming the usual 18% on a reducing balance.
What is qualifying expenditure?
Qualifying expenditure covers most assets purchased for use by business. it includes:
- Office furniture and equipment
- Vans, lorries and equipment
- Business Machines
- Building fixtures e.g. shop fittings, kitchen or bathroom fittings
- Tractors, Combine Harvesters & other Agricultural machinery
- Gaming machines, amusement rides
- Computer hardware and qualifying software
- Computerised/ computer aided machinery including robotic machines
- Wind turbines & fibre optic cabling
- Driving school cars (adapted with dual control mechanisms)
Are there any items of capital expenditure that do not qualify?
- Land, Buildings or cars
- Expenditure incurred in the accounting period when trade ceased permanently
- Existing plant & machinery
- Plant & machinery that was gifted
- Plant & machinery under a long funding lease & subsequently brought into use for other purposes
- Change in the nature/conduct of the trade carried out by a person other than the person incurring the capital expenditure & AIA is the main or one of the main benefits of making the change