Santa’s rounds must work out to be pretty costly. There’s his workshop, which is filled with all the latest machinery and equipment to churn out millions of toys as quickly and as cost effectively as possible, then there’s his sleigh which has to be a costly bit of kit.
The good news for Santa is that he can still update his workshop and/or his sleigh and both will be eligible for the Annual Investment Allowance – or AIA. But he only has until the end of the year to take advantage of the higher threshold, so if he wants his new equipment now, or even for next Christmas, it needs to be a high priority.
What is the AIA?
The Government sets an Annual Investment Allowance, which is a capital allowance that can be offset against plant and machinery used for business purposes. Currently, the threshold stands at £500,000 and you can deduct the full value of items that qualify for AIA up to this level from your profits before tax.
For many businesses this £500,000 threshold is sufficient but since 2008 AIA has been reviewed 4 times. On 1st January 2016, the threshold is due to be lowered to £200,000.
What can be claimed against AIA?
Any plant and machinery that is used for business purposes can be claimed. However, a few exemptions apply, for example, some cars, any items given to you or your business and items you owned for another reason before you started using them in your business. You can only claim AIA in the period you bought them – so Santa needs to get cracking if he plans to update his workshop in time!
How can you claim?
If, like Santa, you would like to make an AIA claim, you’ll need to do this when you fill in your tax return. If your accounting period is more or less than 12 months, then your AIA entitlement will need to be adjusted accordingly. You will also need to take into account changes to the AIA if your accounting period straddles the change in the threshold.
If you would like further information on the capital allowances available to your business, including the annual investment allowance, please speak to your local Wilkins Kennedy advisors. In particular, if your business is considering significant capital expenditure it is important to seek appropriate advice in order to maximise the tax relief available.
Guildford office – t: 01438 306 318 e: Guildford@wilkinskennedy.com
Heathrow office– t: 01784 835 561 e: Heathrow@wilkinskennedy.com
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