From 1 January 2016, the AIA was increased to an annual limit of £200,000. Unlike previous changes, this is a permanent increase.
The AIA allows businesses to write off 100% of expenditure in qualifying assets and equipment, up to the appropriate limit, against their tax liabilities. In effect, qualifying expenditure is treated as any other business expense: it reduces taxable profits.
There have been a number of changes to the £200,000 limit in recent years and where the AIA ceiling has changed, there are transitional considerations that need to be taken into account.
The following example illustrates how these transitional arrangements work in practice:
Where a business has a chargeable period that spans 1 January...