Lack of action on AIA ‘disappointing’

Business leaders have expressed their concern over uncertainty on the level of a key tax relief on investment.

The annual investment allowance (AIA), which enables businesses to deduct investment in plant and machinery from pre-tax profits, up to a certain threshold, was increased to £500,000 a year, from April 2014 to 31 December 2015. The move extended a temporary increase in the usual rate of only £25,000 a year to £250,000 to 31 December 2014

In his 18 March Budget, Chancellor George Osborne said it would be better to address the future level of the AIA in the Chancellor’s Autumn Statement, usually issued in December, adding: “However, 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.”

John Longworth, director general of the British Chambers of Commerce, said: “It is disappointing that concrete action has been delayed until the Autumn Statement. A stable, permanent annual investment allowance would give businesses the certainty they need to make investment decisions.

“We will be pushing relentlessly for the AIA to be maintained at £500,000 over the coming months, and will campaign for the Chancellor’s promise to be actioned immediately after the general election.”

Phil Orford, chief executive at the Forum of Private Business, added that setting a permanent rate of £250,000 would have been “a far more welcome move” to encourage continued business investment.

Whatever the future holds for the level of the AIA, Moore Thompson can provide expert advice to assist businesses in maximising the tax benefits of capital investments. For more information, please contact us.