Clock is ticking for firms to benefit from Annual Investment Allowance tax boon

Mitchell Charlesworth says clock is ticking for firms to benefit from Annual Investment Allowance tax boon.

Mitchell Charlesworth are urging firms to capitalise on major tax savings which can be achieved through business asset purchases in 2015.

Mitchell Charlesworth tax partner Tim Adcock said the clock is ticking for firms looking to qualify for the Annual Investment Allowance (AIA) boon, which was increased from £25,000 to £250,000 in 2013.

The AIA enables businesses buying qualifying assets to potentially deduct the cost in full against taxable profits in the year of purchase.

Mr Adcock said the AIA offer was extended by Chancellor George Osborne during the last budget. However, businesses now have a matter of months to maximise benefits of the initiative which, under current plans, is set to be dramatically reduced after December 2015.

Mr Adcock said the AIA has changed four times since 2008 and is projected to change again to £25,000 on 1 January 2016. He is also urging businesses to keep an eye on detail announced in the Chancellor’s upcoming budget statement on July 08 which may see changes enforced even sooner.

“Businesses now have limited time to benefit from the increased AIA,” said Mr Adcock. “We are urging firms to consider the savings which could be achieved by making large asset purchases before the investment allowance limit is potentially lowered.

“Currently, businesses can offset the costs of certain assets against taxable profits in the year of purchase. Essentially, this means that following the purchase of an asset, the business’s next tax demand could be substantially reduced, providing a significant boost to cash flow.

“Mitchell Charlesworth is urging businesses to consider the impact of an increased Annual Investment Allowance now, as it could revert to a lower level in the future.”

Businesses can claim on all plant and machinery purchases under the AIA initiative. This includes any item which is specifically for business use, including cars.

The allowance further covers costs of demolishing plant, machinery and parts of buildings considered as integral features, as well as fixtures such as fitted kitchens and bathroom suites.

Mr Adcock said the policy further makes it easier for businesses to pursue capital investment with a reduced level of financial exposure.

“The increased AIA policy is providing a strong incentive for businesses to invest in equipment and improve the potential of their operation. In turn it has a knock-on effect further down the chain helping local suppliers and manufactures by increasing their order books.”

For more information contact Tim Adcock on 0151 255 2300 or any member of the Mitchell Charlesworth Tax Team.

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