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Spotlight On: The Annual Investment Allowance extension

The increased cap on the Annual Investment Allowance has been extended to 31 December 2021, but what does this mean for businesses? Our Corporate Tax partner Genevieve Morris explains all.

This is great news for businesses. We have been asking the Chancellor for some time to consider further support for businesses through the pandemic, and this announcement of the extension of the £1 million cap is very positive. It not only encourages investment in capital-intensive projects, but the removal of the cliff-edge this year allows businesses to take a more sensible and longer-term approach in budgeting their capital expenditure during a period in which cash resources may understandably be scarce.

However, we are reminded in the Government’s announcement that the extension of the £1 million cap is ‘temporary’. The Government’s intention is therefore to reduce the annual investment allowance back to £200,000 in 2022.

What should you do next?

For businesses with very large expenditure (£2 million plus), it will still be relevant to assess the level of capital expenditure in 2020, to ensure they can make maximum use of the £1 million allowance in both 2020 and 2021. However, for the vast majority of businesses the £1 million allowance will be sufficient to cover all capital expenditure.

Would you like to know more?

If you would like to discuss any of the above guidance, please get in touch with your usual Blick Rothenberg contact or Genevieve using the details on this page.