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Capital expenditure before 31 March 2012 / 5 April 2012

Posted by: edwinsmith on January 16th, 2012

The Annual Investment Allowance (AIA), which enables businesses to claim full tax relief on most plant and machinery, reduces in April 2012 from £100,000 to £25,000.

Where a business has a chargeable period that spans the operative date of the decrease, the maximum allowance for that business’s transitional chargeable period comprises two parts:

(a) the AIA entitlement, based on the previous £100,000 annual cap for the portion of a year falling before the relevant operative date; and

(b) the AIA entitlement, based on the new £25,000 cap for the portion of a year falling on or after the relevant operative date.

However, capital expenditure qualifying for AIA in the period from 1 April 2012 / 6 April 2012 cannot exceed the entitlement for that period even though it is within the total available for the year.

If you are planning capital expenditure in an accounting period which straddles 31 March 2012 for companies or 5 April for businesses within the charge to income tax, then you need to consider carefully the timing of the expenditure to maximise full tax relief e.g., it may be more tax efficient to bring forward the timing of capital expenditure from May 2012 to March 2012. Please contact us for more information.

Filed under: Tax