It was announced in the Finance Bill that the maximum allowance for Annual Investment Allowance (AIA) is being reduced to £25,000 for expenditure incurred on or after 1 April 2012. If the accounting period is less than one year the maximum allowance is reduced proportionately.
Transitional rules apply for companies whose chargeable period spans 1 April 2012. The following example illustrates these rules:-
A company with a chargeable period 1 January 2012 to 31 December 2012 would calculate its maximum AIA entitlement based on:
a) the proportion of a year from 1 January 2012 to 31 March 2012, that is, 3/12 x £100,000 = £25,000 and
b) the proportion of a year from 1 April 2012 to 31 December 2012, that is, 9/12 x £25,000 = £18,750.
So the company's maximum AIA for this period would be the total of a) and b) : £25,000 + £18,750 = £43,750.
However, if the company incurred no qualifying expenditure between 1 January 2012 and 31 March 2012 then this proportion of the allowance is lost and the maximum entitlement would only be the amount in b) above i.e. the proportion that falls after 1 April 2012.
Therefore, it is advisable to time any qualifying expenditure to take maximum advantage of this allowance. If you need any help or have any queries regarding this, please do not hesitate to contact us on 01992 444466 or at email@example.com.