The government has announced the temporary extension of the increased cap for the Annual Investment Allowance (AIA) until 1 January 2022.
The AIA cap was increased in 2018 by then-Chancellor Philip Hammond from £200,000 to £1 million in order to try and boost investment, with initial end date of next week on 1 January 2021.
However, due to business recovery from the COVID-19 pandemic, Chancellor Rishi Sunak has extended the increase for another 12 months.
The AIA provides businesses with 100% tax relief on capital expenditure up to £1m in the year of purchase on plant and machinery assets.
It can also be claimed on the construction of certain types of agricultural buildings, such as a temporary grain store.
Who can claim AIA?
The tax relief can be claimed by all businesses, including farmers, that operate as sole traders, partnerships or through other companies.
However, to qualify for the AIA, the expenditure must go towards an asset that falls under the ‘plant and machinery’ sector.
This would include the likes of diggers, tractors and other construction equipment and will also stretch to cover office equipment and transport vehicles – excluding vehicles that can be used for private use.