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DON’T MISS OUT- You could gain up to £1,000,000 of tax relief per year!

In November 2020 the Government announced an extension to the temporary increase in the AIA to £1 Million per year to 1st January 2022, when the limit reverts to its former £200,000 per year. So businesses need to act should they wish to take advantage.

The Annual Investment Allowance (AIA) is a type of capital tax allowance that offers 100% tax relief on qualifying capital expenditure in the year of purchase. Expenditure on business assets (e.g. JCBs) per year is 100% allowable against taxable profits of a business, deductible in the year that you buy them. This accelerates the tax relief rather than the tiered writing down allowances (WDA) normally applied over several years.

£1 million per year tax relief is available for qualifying expenditure – but the exact amount you can claim is based on eligibility and the timing of the purchase in relation to your financial/tax year end.

How can financial year end impact the AIA relief available?

Due to how the available AIA relief is calculated, for businesses whose financial year spans the calendar year (31st March or 5th April for example), their effective AIA limit for their financial year is calculated by aggregating the time-apportioned amount of each of the £1m and the £200,000 limits.

Example: 31st March year end

A business with a 31st March year end will have a chargeable period which runs from 1st April 2021 to 31st March 2022. The overall AIA available to them for this period will be £800,000, being the total of the following two amounts:

From 1st April 2021 to 31st December 2021= £750,000 (nine months’ worth of the £1m limit)

From 1st January 2022 to 31st March 2022 = £50,000 (three months’ worth of the lower £200,000 limit)

However, whether or not the full £800,000 limit is available will depend on when the company incurs its qualifying expenditure within the year to 31st March 2022.

Claim the AIA against qualifying assets placed on Hire Purchase (HP) – just as if you had paid cash.

You can enter into a Hire Purchase agreement for qualifying assets and benefit from the relief prior to all the payments of the agreement being made, in addition to the normal cash flow benefits of using Hire Purchase

What should you do today?

Business are also urged to check out the lead times on new orders of new JCBs because the relief is only available in the financial year that you make the purchase. Get the timing of your order wrong could be costly!

The clock is ticking and the increased AIA limit to £1 million albeit welcome, is only temporary and the window of opportunity is shorter for some businesses than others. For more information about the AIA contact us here or contact your local depot, alternatively you can click here to find your local JCB Finance Relationship Manager who will also be able to help.

 

Scot JCB is not a tax or financial advisor - always seek advice from your accountant or finance director, because every business' circumstances are different. Businesses should not make investment decisions purely on a tax basis - there should be a compelling business case for the investment.

 

UK business users only, terms apply.

 

Scot JCB (Registered in England No: SC51692 Registered office: 400 Townmill Rd, Glasgow, G31 3AR) is authorised and regulated by the Financial Conduct Authority.Scot JCB is a credit broker and JCB Finance Ltd are its preferred supplier of Finance. JCB Finance Ltd (registered in England No:972265 and whose registered address is: The Mill, High Street, Rocester, Staffs, ST14 5JW) is authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 708332). We receive a commission from JCB Finance which is a tiered flat fee that is based on the value of the finance agreement. These payments are not additional fees that you will have to pay and do not affect the amount you pay under your finance agreement. Finance is restricted to business users only in the United Kingdom, subject to acceptance by JCB Finance Ltd. Terms and return conditions apply

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