Press release: Increased AIA may bring only complexity for many businesses

The ATT notes that the 30,000 businesses whose annual expenditure on qualifying assets (according to HMRC statistics) exceeds the current annual expenditure limit of £200,000 will undoubtedly welcome the measure. But the ATT is concerned that the other 97 per cent of British businesses who claim the allowances but whose expenditure is below the annual £200,000 ceiling may be saddled with the complications introduced by the temporary increase without being able to benefit from it.

Michael Steed, Co-Chair of ATT’s Technical Steering Group, said:

“We are concerned that the two-year temporary increase in the Annual Investment Allowance may bring only complexity for many businesses.

“The AIA has ‘yo-yoed’ around since its introduction in April 2008. In the past ten years, we have seen the ceiling set at £50,000, £100,000, £25,000, £250,000 and £500,000 before settling in January 2016 at the current £200,000 level. Businesses repeatedly call for stability in the allowance in order to be able to plan for capital expenditure but the transitional rules required in order to cope with the fluctuating levels have produced unintended consequences.

“In some cases, businesses whose annual expenditure in their accounting year was apparently within the annual limit have ended up being denied the full benefit of the allowance because of the timing of their expenditure within their accounting year.

“Given that such a relatively small number of businesses are likely to be able to take advantage of the increase from £200,000 to the £1,000,000 two-year limit, we think that the complicating transitional provisions should only apply to those businesses that are able to benefit from the temporary increase. The simplest way for this to be achieved would be to permit all other business to opt out of the increase – thereby enabling them to ignore the transitional rules.”