The enhanced AIA of £500,000 is available for capital expenditure on plant, machinery and commercial vehicles (not cars) purchased from April 2014 until 31st December 2015. This an important tax incentive which accelerates the tax relief so that 100% of eligible expenditure can be offset against taxable profits in the first year. In effect for every £1 spent the Government will give you £1 back in the form of relief against your taxable profits. The net benefit will depend on the rate of income tax or corporation tax that your business pays - which could be between 20% and 45%.
Capital expenditure via a Hire Purchase (HP) agreement is also eligible for exactly the same AIA, but you will also gain a terrific cash flow advantage.All businesses can claim the AIA – the only exceptions are Mixed Partnerships or Trusts (i.e. those in which a company is a member). If you have not already planned how to maximise the benefit speak to your accountant or finance director now. If your Financial Year end is March or your Tax Year End is April then your £500,000 AIA has already dropped to £375,000.
See below the AIA chart in more detail.
However the Chancellor did say: “I am clear from my conversations with business groups that a reduction to £25,000 would not be remotely acceptable – and so it will be set at a much more generous rate.”
Clarity should be forthcoming at the next Autumn Statement in December or following an emergency budget when a new government is formed.
Other factors being equal, if your business is contemplating purchasing eligible plant or commercial vehicles in the near future, there are some strong tax-based and cash flow arguments to carefully plan these purchases before the end of your financial year and certainly before 1st January 2016, so that you can maximise on the available AIA before it changes to an amount as yet unknown.
|Click here to see the AIA chart in more detail|
JCB Finance Ltd is authorised and regulated by the Financial Conduct Authority. JCB Finance provides asset finance for UK agricultural businesses for both JCB and non-competitive machinery, including vehicles and cars but it is not a tax or financial advisor - always seek advice from your accountant or finance director, because every business’ circumstances are different. Businesses should not make investment decisions purely on a tax basis.