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Changes to the Annual Investment Allowance

| Kay Botley | 7 October 2020

A reminder to GPs and GP practices that the temporary increase to the Annual Investment Allowance (AIA) comes to an end on 31 December 2020.

You may remember that there was a temporary increase to the AIA from £200,000 per year to £1million per year between 1 January 2019 and 31 December 2020. However, the allowance reduces back to £200,000 from 1 January 2021. 

Special rules apply if your accounting year is not 12 months or if your accounting year spans the changes.  

AIA can only be claimed in the period you bought the item. The date you bought it is classed as when you signed the contract, if payment is due within less than four months or when the payment is due, if it is more than four months later. 

If you buy something under a hire purchase contract you can claim for the payments you have not yet made, when you start using the item. This does not include the interest payments. 

Remember that it is generally the total allowable expenditure for each individual GP plus the practice that is compared to the AIA. 

You can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax. 

If you sell the item after claiming AIA you will need to pay tax. 

You can claim AIA on most plant and machinery up to the capped amount.

Update

On 12 November, the government announced an extension to the AIA tax break until January 2022 to stimulate investment in UK manufacturing.

New measures to tackle promoters of tax avoidance, including tougher sanctions and additional powers for HM Revenue & Customs, are to be consulted on this coming spring.

 

Please speak to your Duncan & Toplis contact to ensure you are aware of the maximum allowance applicable to you and your practice and what is qualifying expenditure. 

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