Few UK SMEs have plans to take advantage of the temporary increase in the Annual Investment Allowance (AIA), according to research from Braemar Finance.
The increase in AIA was introduced by the government in January, raising the previous limit of £200,000 to £1m for a two-year period. This is to enable faster tax relief for qualifying assets, with the aim of helping businesses to invest and grow, the government said. Introduced in 2008, the allowance means a business can write off 100% of qualifying capital expenditure against taxable profits for the same period.
But Braemar Finance’s research showed that well over half (58%) of SMEs aren’t aware that the Government had made the increase to the AIA, while only 13% are planning to significantly increase investment in 2019 as a result of the rise.
“The AIA provides significantly faster tax relief for qualifying assets and is a great way for firms to invest in the equipment that could transform their business,” said Aileen Boyle, MD, Braemar Finance. “However, it’s clear that more needs to be done to get the message out to business owners because the AIA was always intended as an economic stimulus by the Government.
“A knock-on effect of this lack of knowledge is that business owners aren’t taking advantage of the increase to invest in their business.”
AIA is available for most assets purchased by a business, including equipment, building fixtures and computers.