Farming businesses seeking investment in machinery and equipment will be delighted to hear that the annual investment allowance (AIA) has been increased to £200,000.
Currently business are allowed to deduct up to £500,000 from pre-tax profits towards the cost of investment in new equipment, but this amount was set to plummet to £25,000 at the start of next year.
However, the Chancellor, George Osborne, announced during the Summer Budget that the allowance will now be set at £200,000 “this year and every single year”. While this is still a reduction on the amount that businesses can currently claim back, it is still well above the previous allowance for next year.
The Allowance is designed to encourage investment by deducting the full value of an item that qualifies for AIA from a business’s pre-tax profits.
It applies to all plant and machinery equipment bought by a business, which includes alterations to existing buildings to install other plant and machinery and integral features, such as lifts, escalators and air-conditioning and air cooling systems.