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capital allowance claims



With Jeremy Hunt being brought in as the new chancellor, he reversed many changes that were brought forward in the mini-budget. One of the decisions he did not reverse was that the annual investment allowance (AIA) is to remain at £1 million. The September mini-budget announced that the AIA will stay at £1 million rather than reverting back to £200,000 from April 2023.


What is AIA?

The annual investment allowance provides businesses with relief for qualifying expenditures. This means that the total value of expenditure can be deducted from profits. AIA is available to companies and unincorporated businesses if they have qualifying expenditures. The AIA was increased to £1 million back in 2018 and was originally meant to be temporary but after many extensions, it has been made permanent.


How to claim?

When making a claim for AIA, a company or unincorporated business can decide the amount of relief they receive for qualifying expenditure. This means that they can choose to claim AIA on how the value of expenditure or claim none at all. This can be beneficial for some, as they can choose claims that secure the best outcome.


If the AIA is not claimed in relation to qualifying expenditure, a writing-down allowance may be claimed in its place. The AIA may only be claimed during the taxable period in which the expense was incurred; however, writing-down allowances may be claimed at a later date, provided that doing so is advantageous.


What does that mean?

Clients may want to reassess their capital spending plans in light of the recent confirmation that the AIA maximum will stay at £1 million. The announcement is encouraging because it relieves the need to meet a deadline in order to take advantage of the higher limit and avoid being subject to the transitional rules that would have been in place had the cap returned to £200,000. When an accounting period included the date March 31, 2023, these rules were harsh because qualifying expenses incurred during the portion of the accounting period that ended on or after that date might not have qualified for the AIA in full, even if their total amount was within the AIA cap for the year.



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