If you are planning a substantial investment in plant and machinery over the next few months, please take time to read this.
The £1m temporary increase in the Annual Investment Allowance (AIA) expires on 31 December 2021 when it reverts to £200,000. As expenditure will be split into periods before and after the change, this can have unwelcome tax consequences if you get the timing wrong. For example, if you have a 31 January 2022 year end and you spend £100,000 on plant in January 2022, you will only be entitled to claim Annual Investment Allowance of £16,667 (being 1/12 x £200,000).
Therefore, if you are planning any large purchases over the next few months, please speak to us so we can advise you on when would be the best time to do so.
This is particularly relevant to sole traders and partnerships and also limited companies buying second hand plant and equipment or other assets which do not qualify for the Super Deduction which applies between 1 April 2021 and 31 March 2023.
Please get in touch as we are here to advise you. For capital allowances there are special rules which determine the date on which plant and machinery qualifies for Capital Allowances which depend on whether the asset is paid full in full or is acquired on finance.
As exact timing is key here, please speak to us for advice.