With effect from April this year, Annual Investment Allowance has been increased to £500,000, a figure that will remain in force until December 2015.
This has been done as a means of attempting to encourage businesses to invest in their future growth and development.
Traditionally, assets, bought by a business, with more than one year of expected useful life, would have their cost spread over a number of years, in line with the expected benefit of that asset to its owner.
Annual Investment Allowance was originally introduced (at a starting rate of £50,000 per annum) to allow us to offset the entire cost of a piece of capital equipment in the year of purchase, thereby significantly reducing our levels of tax in that year.
The current limit is now 10 times that of the introductory rate, which, whilst it will be of major benefit to a significant number of larger companies, it does move it farther into the ‘So what’? category for the vast majority of smaller businesses, who’s annual equipment spend is closer to £500 than it is £500,000.
More details of this can be found on the HMRC Web Site.