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Set Annual Investment Allowance at permanent £500,000 level, says BCC

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The BCC said the move would help achieve better balanced growth and tackle the “unacceptable uncertainty created by the constant chopping and changing of UK tax structures and incentives”.

Under current plans the Annual Investment Allowance, which enables firms to purchase plant or machinery assets up to a certain limit which are fully tax deductible, will return from £500,000 to £25,000 after the latest temporary extension ends on 31 December 2015.

In addition to a permanently high allowance, the BCC also wants it to be widened to include improvements to business premises to boost productivity, efficiency and hiring.

The BCC believes the changes would boost overall business investment and support the chancellor’s ambition to turn the UK into the richest country, by GDP per capita, in the G7 by 2030.

It said UK businesses wanted “greater stability” in allowances, helping to invest with confidence. The AIA has changed four times since 2008 and will change again in 2016.

 “The huge declines in business investment at the end of 2014 and our forecast for 2015, which predicts the slowest rate of growth for investment in six years – are a warning sign that more needs to be done to support long-term business investment,” said John Longworth, the BCC’s director general. “Businesses are operating in uncertain times with conflict in the Middle East and Russia and a sluggish Eurozone to contend with. Yet the greatest source of uncertainty is political and home-grown. Businesses have grown tired of constant chopping and changing in the UK tax system. They need long-term certainty, rather than short-term incentives, to help support investment decisions.”

Read more about the AIA:

He added that it was time the government acknowledged that by forgoing some tax receipts in the short term it “will reap the rewards later”.

Longworth added: “A permanent AIA would be a ‘triple win’ proposition – for business, for jobs and for government.”

The BCC said the estimated average cost of its proposal for a permanent AIA would be £963m per year. It believes this could be funded either through a 0.1 per cent reduction to the average annual level of expected government current spending or a reallocation of less than a fifth of the average departmental underspend recorded over the last four years.

Image: Shutterstock

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