Up to £1m tax break for investment in qualifying assets

The Chancellor picked out business investment as his preferred give-away to the business sector in his Autumn Budget 2018.

The Annual Investment Allowance is being increased from 1 January 2019, to £1m from the present base level set some years ago of £200,000. The increase is due to be available for two years, until 31 December 2020. At this later date the AIA will presumably return to the £200,000 limit.

The AIA allows for the 100% write down of qualifying asset purchases against business profits. For profitable companies, partnerships (excluding partnerships where one of the partners is a company or another partnership) and sole traders this is a generous tax break.

The AIA is available for most plant and equipment purchases. These include:

  • items that you keep using in your business, including commercial vehicles and cars if they are working assets, for example taxi cabs or driving school, dual control vehicles;
  • costs of demolishing plant and machinery;
  • parts of a building considered integral, known as ‘integral features’;
  • some fixtures e.g. fitted kitchens or bathroom suites;
  • alterations to a building to install other plant and machinery – this doesn’t include repairs.

The AIA is not available for purchases of:

  • cars that are not working assets;
  • items you owned for another reason before you started using them in your business; and
  • items given to you or your business.

Whether or not businesses will be encouraged to invest based on this additional tax break is another matter. It will not go unnoticed that the increases allowance is offered in the two years following our exit from the EU. It would be a brave, and perhaps rash business person that would make investment decisions in this transition period based purely on tax considerations.

If you are motivated to reconsider future investment in qualifying plant and equipment to take advantage of this £1m tax allowance can we suggest that you consider funding and return on investment considerations as well as possible reductions in your tax bill before signing on the dotted line. Please call if you would like our help.

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