Talk To Your Client - Reduction of the AIA

  • Mark Morton
  • 29 November 2021 09:20

The maximum AIA was set at £200,000 for expenditure incurred since 1 January 2016. For expenditure incurred on or after 1 January 2019, the maximum AIA was increased to £1m. This was for a two-year period and the AIA was set to revert to £200,000 for expenditure incurred on or after 1 January 2021.

However, the temporary £1m cap was been extended until 31 December 2021 and in the recent Budget has been deferred again until April 2023.

Chargeable periods which straddle 1 April 2023

Where a chargeable period (‘the second straddling period’) which begins before 1 April 2023 and ends on or after that date, the maximum AIA for the second straddling period is the sum of the maximum allowances that would be found if the following were treated as separate chargeable periods:

  • so much of the second straddling period as falls before 1 April 2023; and
  • so much of the second straddling period as falls on or after that date.

With regard to expenditure incurred on or after 1 April 2023, the maximum AIA for the second straddling period is the maximum allowance, calculated in accordance with the second bullet point above.

 

Example

A company with a 30 June year end will have an AIA as follows:

Accounting period to 30 June 2022 £1,000,000

Year to 30 June 2023

July 2022 – March 2023 9/12 x £1,000,000 = £750,000
April 2023 – June 2023 3/12 x £200,000 = £50,000
Total   = £800,000

 

If the business spends £800,000 in the first nine months of the accounting period relief is due in full. If the business does not incur any expenditure in the first six months, only £50,000 will be available for expenditure between 1 April and 30 June 2023.

 

In addition, there may be an added complication for companies due to the new superdeduction, a First Year Allowance, again running to April 2023. No ensure your clients maximise their allowances, make sure you keep then in the loop.

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