Lease and hire purchase finance provider BNP Paribas Leasing Solutions has warned that acting now will allow for lead times of several months on “large and complex” orders such as customised machinery.The Annual Investment Allowance (AIA) currently means businesses can use a portion of the £500,000 to claim relief against 1 January 2016 corporation tax bills, and use the balance of the allowance to deduct the cost of eligible investments by the end of December from a 2015/16 bill. Charting its history, the AIA was initially cut from £100,000 to £25,000 by the coalition. However, in a surprise move, chancellor George Osborne increased it ten-fold to £250,000 in 2012 and then doubled it to £500,000 as part of the 2014 Budget. BNP Paribas calculations indicate that delaying and then missing the 31 December deadline could cost up to £389,500. The last reduction in the AIA was found to have brought about a £1.5bn fall in the amount of tax relief claimed on capital spending. Tristan Watkins, UK country manager for BNP Paribas Leasing Solutions, emphasised that delaying decision making on investments could be “very expensive”. “Major capital investments such as a complete IT hardware and systems refit, a combine harvester for a farm, or large-scale excavation equipment for a construction business cannot just be bought off the shelf, and will easily exceed the £25,000 limit that the Annual Investment Allowance is expected to fall to. “If they are planning a major investment, businesses will need to get talking to suppliers now, and will generally need to have placed an order by the summer in order to ensure that their investment qualifies of the £500,000 relief that is available now.” Read more about the AIA:
- What is the Annual Investment Allowance?
- Annual Investment Allowance cuts loom
- Less than a year left to benefit from increase in AIA
“Now that the economic recovery is taking root and business confidence is returning, we would expect an even larger number of businesses to be looking to the AIA to transform their prospects.” Image: Shutterstock
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