Annual investment allowance ('AIA')
The AIA is generally aimed at small to medium sized businesses and investors and enables Capital Allowances of 100% to be claimed on most types of purchases of plant or machinery, excluding cars.
In recent years HMRC has tinkered with the AIA and up to April 2014, maximum rates have varied between £25,000 and £250,000.
However, from 1 April 2014 (companies) and 6 April 2014 (individuals), the AIA was increased to £500,000 and will continue at this rate until 31 December 2015.
This generous relief will now enable most businesses to claim Capital Allowances on the whole of their capital expenditure on plant or machinery in the year of purchase.
E.g. a partnership making a net profit of £1.5m in the year ending 30 April 2015 purchases a new head office for £2m on 30 April 2015 and following a specialist survey it is established £500,000 qualifies for Capital Allowances. The whole of the £500,000 can be claimed against profits in the year ending 30 April 2015 saving the partners tax of £500,000 x 40% = £200,000.
From 1 January 2016 the Chancellor announced the AIA had been reduced to a permanent figure of £200,000.