PLANT firms have been urged to act quickly to make big investments in their fleets to benefit from “largely unnoticed” changes to the Annual Investment Allowance (AIA).
JCB Finance has highlighted a temporary tax relief in the Autumn 2018 budget which could allow businesses to effectively benefit from £1 tax relief for every £1 spent on plant and machinery. The AIA relief allows expenditure on plant and machinery purchases up to the AIA limit to be set against company profits in the year the expenditure occurs.
In 2018 the AIA stood at £200,000 and rose to the new threshold of £1 million from January 1st 2019 for two years, which JCB Finance explained makes it a “valuable incentive for large-scale investment” for growth or replacement of ageing equipment.
However, with a a deadline of January 1st 2021 when the allowance reverts back to its former £200,000, companies choosing to embark on significant capital expenditure have been advised to begin consulting with their accountant now to maximise on any available tax relief.
JCB Finance added that poor planning and timing could mean missing out. By increasing the relief on qualifying expenditure up to a £1 million limit, those businesses already spending up to the £200,000 threshold are said to have a considerable incentive to increase or bring forward their capital expenditure on plant and machinery.
JCB Finance managing director Paul Jennings said, “This important tax incentive allows 100% tax relief in the first year and is designed to encourage businesses to invest in plant, machinery, commercial vehicles and a broad range of other assets. Depending on the business’ rate of tax, it is an open invitation to invest in plant and machinery and secure the equivalent of a 19% to 45% subsidy. Better still – if you acquire the plant via a Hire Purchase agreement the acquisition, for tax purposes, is treated as if cash had been paid. Plus any interest payable is tax deductible too.
“However, different financial year ends will affect the proportion and timing of expenditure. Getting the timing and the amounts right is crucial to your business. We are already recommending to our customers that they speak to their accountant and to our JCB Finance team now, so they can plan the optimum time to take delivery of their machinery.”
JCB Finance provided a chart to illustrate the maximum amounts available by showing four different company financial year ends, and how vital it is to spend the right amount within the right periods in order to maximise the available tax benefits.
