Annual Investment Allowance

Claim your Annual Investment Allowance

The Annual Investment Allowance (AIA) can be claimed on newly purchased fixed assets which are used in a business, also known as ‘plant and machinery’.

It allows a company to claim 100% tax relief in year of purchase (as opposed to relying on the 8% or 18% per year writing down allowances).

The AIA limit was increased to £1 million from 1 January 2019 which will now remain in place until 31 December 2021 (it was originally set to run only until the end of 2020).

What qualifies as plant and machinery?
  • Items that fulfil a function within the business (e.g. servers, scanners etc.);
  • Integral features of the business premises, e.g. lifts, air conditioning and heating systems, electrical or hot and cold-water systems;
  • Fixtures, e.g. fitted kitchens, bathroom suites and security systems; and
  • Alterations to install further plant and machinery in the building.

Please note that the above list is not exhaustive.

What does not qualifies as plant and machinery?
  • Any items held on operating lease or short-term funding leases (generally less than 5 years);
  • Buildings, including gates, mains water or gas supply and shutters;
  • Land and structure e.g. roads, bridges or docks;
  • Items used for business entertainment purposes e.g. music systems or luxury items such as a yacht;
  • Repairments to existing plant and machinery; and
  • Main water and gas systems.

Please note that the above list is not exhaustive.

Which items do not qualify for Annual Investment Allowance claim?
  • Cars;
  • Items originally bought/ owned for non-business purposes;
  • Items gifted/donated to you as an owner or your business; and
  • Items purchased from connected parties (e.g. a company that you are the sole shareholder of).

Please note that the above list is not exhaustive.

Who can make an Annual Investment Allowance claim?
  • Companies;
  • Partnerships; and
  • Sole Traders.

The AIA is claimed on the relevant entities tax return (e.g. sole trader’s tax return) and can only be claimed by the entity that has purchased the fixed asset in question. Any Sole trader or Partners with more than one business can claim AIA individually for each business.

Annual Investment Allowance

However, if all the businesses are controlled by the same person in the same premises with similar trading activities then only one AIA can be claimed. Companies within the same corporate group will also only benefit from one AIA between them.

Furnished holiday lettings

An Annual Investment Allowance claim can be made on the assets used in a furnished holiday letting business. These items must be qualifying ‘plant and machinery’ purchased for the building.

Residential lettings

Rented properties e.g., a flat that is let out, do not qualify as a trading business. Therefore, an AIA claim cannot be made on any plant and machinery items purchased for use in such a business.

A capital allowances claim can be made for plant and machinery items used for any common areas in multiple occupancy dwellings. For example, any fixtures such as security cameras used in student halls.

Please note that this will not include any areas that constitute part of a dwelling, (e.g. a communal kitchen).

Please see the table on the attached PDF for AIA amount for each accounting period since 2008.

For more information

For more information, please contact us on:

01483 416232