Government extends £1 million tax break to stimulate investment by UK businesses
As the Budget originally scheduled for Autumn has been postponed until Spring, the Government made a number of announcements regarding tax last week. This includes the extension of the Annual Investment Allowance £1 million temporary cap until 1 January 2022, in order to stimulate investment and support business confidence.
The Annual Investment Allowance (AIA) is a tax relief for businesses on the acquisition of plant and machinery that gives full tax relief in the year of purchase. The announcement means that businesses, including UK manufacturing firms, will be able to continue claiming up to £1 million in same-year tax relief (100% capital allowances) through the AIA for plant and machinery assets acquired until 1 January 2022.
The cap was previously due to revert to £200,000 on 1 January 2021; now it will only fall to £200,000 on 1 January 2022 (unless extended again).
Other announcements made include the introduction of new measures to tackle promoters of tax avoidance, including tougher sanctions and additional HMRC powers, which will be consulted on in the Spring. Alongside this, the government has published draft tax legislation of a range of new measures, including the Plastic Packaging Tax.
Tim McElwaine, Tax Senior Manager at UNW, said: “Businesses will welcome the extension of the temporary £1m AIA cap, perhaps particularly at a time when recent news about vaccines has reduced some of the uncertainties about the future, allowing businesses to plan ahead with more confidence.”
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