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The Annual Investment Allowance limit, was set to fall from £1 million to £200,000 from 1 January 2021, before HMRC announced today that the decrease will be postponed for a year, meaning that the £1 million limit will remain in place until 1 January 2022.

This is great news for businesses who were looking to spend on plant and machinery and now gives you more time to plan and spend wisely in the current climate.

As you will be aware, businesses can claim 100% capital allowances (AIA) on expenditure incurred on qualifying plant and machinery, up to a specified annual limit each year.

Financial Secretary to the Treasury Jesse Norman said:

“It is vital that we support business through the difficult months ahead. Extending the Annual Investment Allowance’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.”

Here’s a quick look at some of the machinery and plant that qualifies and remember if you lease the plant or machinery that’s not an allowed expense.

Where a business spends more than the annual AIA limit, any additional qualifying expenditure will attract relief under the normal capital allowances regime (rates at 18% or 6%), which can considerably delay the tax relief.

We would always of course recommend that such spending should take account of commercial considerations.

It is therefore important not to rely solely on this advice and to speak to your usual contact at Towers + Gornall to confirm the exact position in your circumstances.


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