The ‘annual investment allowance’ (AIA) was introduced from April 2008 (1 April for corporation tax and 6 April for income tax) to provide a 100% allowance on the first £50,000 of expenditure on plant and machinery (other than cars). It replaced the first-year allowances regime for small and medium-sized enterprises. 

What lessons can be learned so far? 

The real problem is that for accounting periods straddling April the position is complicated! The key issues are:

1.      When was the expenditure incurred?

2.      What amount of AIA is available on a time basis?

3.      Against which assets should the AIA be claimed?

4.      What about the interaction with short-life assets?

Is it equitable that identical transactions can be taxed very differently according not only to the date expenditure is incurred but also because of different accounting dates?

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