Should you invest?
For most of us in business the recent, and continuing, Brexit fiasco has meant that making meaningful investment decisions has proved to be problematic. What will our future trading relationship with Europe look like and how will that affect our own trading results? However, despite Brexit we still need to continue to operate and expand our businesses, which will require investment.
It would be foolhardy to forget that in the UK we have an extremely generous tax allowance, aptly called the Annual Investment Allowance (AIA), that means we can write off the full cost of qualifying assets against our profits for tax purposes. Although many small businesses are now incorporated those who still trade in partnership or as a sole trader and pay income tax on profits at the 40% or 45% rate, could see a significant tax saving by utilising the AIA.
The current scope of the AIA is set out in a summarised form below:
- You can claim AIA on most purchases of plant and other equipment, computers or commercial vehicles.
- You cannot claim AIA for the acquisition of cars, items you owned for another reason before you started using them in your business, or items given to you or your business.
- From 1 January 2019 to 31 December 2020, the amount you can claim under the AIA is limited to £1m.
- You can only claim the AIA in the accounting period when you bought the item. The date bought is defined as when you signed the contract to purchase – if payment is due within four months – or when payment is due if it’s more than four months.
- If your business closes you cannot claim the AIA in the final period of trading.
If you use our management accountant services we will provide you with ongoing business support, which will help you to make those complicated business decisions of why, when and how to invest. Call TLA Business Services today on 01905 21411