Changes to Capital Allowances

Annual Investment Allowance

On 1 January 2019, the Annual Investment Allowance, which is available for businesses to claim on their expenditure on plant and machinery, will temporarily increase from £200,000 to £1,000,000 for two calendar years.

The Annual Investment Allowance (AIA) is a 100% up front allowance which enables a business to write off all of the cost of plant and machinery in the accounting period in which the business incurs expenditure.

Care needs to be taken by businesses which expect their capital expenditure to exceed the £200,000 as there are transitional rules where the accounting period does not follow the calendar year.  For example, if a business has already spent in excess of £200,000 in the year ended 31 March 2019, this does not mean that it will be able to claim the increased amount on its capital expenditure in the first nine months – the AIA will be restricted to £200,000 for those nine months, but overall there will be £400,000 available to claim.

Special rate pool

One of the announcements in the Autumn Budget is that the rate at which plant and machinery held in the special rate pool will reduce to 6% from 8% from April 2019.  Items which are covered by this pool include thermal insulation, integral fixtures and cars with CO2 emissions of more than 110g/km.  This means that it could take more than 100 years for the cost of a company car to be fully written down!

Structures and Buildings Allowance

A new Structures and Buildings Allowance (SBA) has been announced where new non-residential structures and buildings will be eligible for a 2% annual capital allowance.  Relief will be restricted to the costs of constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence.

The allowance is available for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018 and can only be first claimed when the building has first come into use.

If you would like to discuss this blog in more detail please email Jenny Trunks or call us on 01772 821 021.