Annual investment allowance (“AIA”) extended to £1m for another year

The government has announced that the AIA limit, which was due to revert to £200,000 with effect from 1 January 2021, will remain at £1 million for another year.

The change of policy means that businesses can continue (until 1 January 2022) to claim a100% tax deduction for the accounting period in which they purchase qualifying plant and machinery, up to the £1 million cap. Special rules apply to group companies.

The Financial Secretary to the Treasury has said “It is vital that we support business through the difficult months ahead. Extending the AIA’s £1m cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.”