Businesses can currently write off 100% of the cost of qualifying assets against their taxable profits, up to an annual limit of £100,000. AIA allows businesses to receive tax relief on qualifying plant and machinery expenditure in the year it is incurred. Assets that can be written off in this way include commercial vehicles, plant, computers and other equipment – cars do not qualify and are dealt with separately.
The AIA Cap is to be reduced from £100,000 to £25,000 from April 2012. Therefore if you are planning any significant expenditure of this nature, timing is crucial to secure the optimum tax relief.
The changes mean that only the first £25,000 of qualifying plant and machinery bought can receive 100% allowance against taxable profits in the first year. However any plant or machinery bought over and above the £25,000 cap can only be relieved against your taxable profit at the restricted allowance of 20%. This 20% allowance will continue to be set against profits each year until all the cost of the asset is claimed.
For more information on how you should plan your expenditure to maximise your savings using AIA contact us here at M.B. McGrady & Co.