AIA (Annual Investment Allowance)
A tax relief is the Annual Investment Allowance (or “AIA”). It is eligible for claim by partnerships, limited liability companies, and sole proprietorships. It can be claimed by sole proprietors for the purchase of equipment used in the course of conducting business. It is comparable to a capital allowance.
One hundred percent of the cost of qualifying equipment for the AIA is deductible when calculating profits and determining the amount of tax owed on profits. Typical examples of apparatus that qualify for the AIA include machinery and tools.
Why equipment and instruments predominate?
In 2008, the AIA was enacted primarily to incentivize companies to make investments in PPE (property, plant, and equipment) in order to stimulate economic expansion. The following are examples of items that can be claimed back:
- Computing devices
- Land Equipment
- Workplace furnishings
- Certain vehicles
- Conditioning (air)
- Agricultural apparatus
Implementation of the Annual Investment Allowance?
- You acquire a brand-new laptop for your sole proprietorship.
- The price of the laptop is £1,200.
- £20,000 represents your total profit from self-employment.
- The laptop is eligible for the Annual Investment Allowance, which allows for a deduction of the laptop’s cost from one’s earnings.
- You are only required to compute your tax liability on £18,800 (£20,000 minus £1,200).
Considerations with regard to claiming?
Prior to filing an AIA claim, it is important to consider the following:
- You may only claim a maximum of £1 million for the year until March 31, 2023.
Not every equipment item is eligible for AIA. - A vehicle is not eligible for AIA; nevertheless, one may claim writing-down allowances in lieu of this.
- This enables you to submit a claim over the course of multiple years as opposed to all at once. Learn more about the specifics of filing an AIA claim through HMRC’s website.
