As a further support measure during the COVID-19 pandemic, and in a bid to encourage investment in UK manufacturing, the Government has announced an extension to the £1 million annual investment allowance (AIA).
The AIA had been set at a temporary level of £1 million since 1 January 2018 but was due to drop back to £200,000 from 1 January 2021.
The Government has now confirmed that businesses will be able to continue to claim 100% relief on qualifying expenditure of plant and machinery of up to £1 million, in the year that it is incurred, up until 1 January 2022.
This extra 12 months will give businesses a bit more time to take the plunge with significant investment decisions that may have been delayed, due to uncertainty with COVID-19, and still receive relief upfront.
Transitional provisions will apply when the cap is eventually reduced, and businesses will need to consider their accounting year end date, as well as other expenditure incurred during the financial year, to determine the maximum amount that can be claimed.
Please get in touch if you would like further information on what expenditure may qualify for the AIA and/or how to time your expenditure to maximise your allowance.