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Businesses with accounting periods that straddle the New Year have been offered clarification of the temporary tenfold rise to the annual investment allowance (AIA).
The £250,000 annual limit will apply from 1 January 2013 for two years for all firms, whether within the charge to corporation tax or income tax. Transitional rules will apply to chargeable periods that overlap 1 January 2013 or 1 January 2015.
The newly published Finance Bill 2013 shows that a firm with a chargeable period that began on or after 1 or 6 April, when the allowance was reduced to £25,000, will calculate its total allowance for the period in two parts:
- Entitlement based on the current £25,000 annual cap for the portion of a year falling before 1 January 2013; and,
- Entitlement based on the new £250,000 cap for the portion of a year falling on or after 1 January 2013.
An organisation that has a transitional chargeable period that began before the date of the AIA limit reduction will calculate its whole allowance for that period in three parts:
- based on the £100,000 cap that applied before 1 or 6 April 2012 for the portion of a year falling before that date; and,
- based on the current limit for the portion of a year from 1 or 6 April to 31 December 2012; and,
- based on the new increased cap for the portion of a year falling on or after 1 January 2013.
Finally, firms with chargeable periods spanning 1 January 2015 will calculate their maximum allowance for that transitional period in two parts:
- based on the temporary £250,000 for the portion of a year falling before 1 January 2015; and,
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based on the reversion to £25,000 for the portion of a year falling on or after 1 January 2015.
