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Annual Investment Allowance on capital expenditure increased to 250,000 for two years

Osborne1

In his autumn statement, Chancellor of the Exchequer George Osborne has announced a temporary increase in the annual investment allowance for plant and machinery from £25,000 to £250,000.

Starting on 1 January 2013 and for the next two years, £250,000 worth of investment will qualify for 100% relief, the chancellor said. ‘This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs.’

The allowance, introduced in 2008, was reduced from £100,000 to £25,000 from April 2012.

Today’s announcement will be welcomed by many SMEs. Leaders of 14 trade bodies wrote to The Sunday Times urging the government to increase capital allowances for investment in plant and machinery. Critics have pointed out that cuts in the main rate of corporation tax have not benefited smaller companies, some of which have been worse off as a result of recent changes to the capital allowances regime.

Chris Sanger, head of tax policy at Ernst & Young, said the announcement represented the fourth change in five years.

‘The last government introduced the allowance at £50,000, increasing it to £100,000 and it was cut by this government to £25,000 from April 2012. Whilst such rapid changes could look incoherent, these incentives are clearly linked to the state of the economy and can accelerate investment,’ he said.

For companies in the Surface Finishing industry, this will come as welcome news. Many SMEs have been reluctant to invest in plant and machinery during the recession. This is either because of shortage of demand or uncertainty about the long term prospects for growth.

The introduction of the 100% Annual Investment Allowance, together with next April’s long awaited reduction in Corporation Tax will make the UK the most favourable regime in the EU for manufacturers and sub-contractors. It provides the incentives that are needed to invest for expansion and to seek new market opportunities.

Riley Surface World works actively with companies to maximise tax incentives and assist with finance for plant and machinery purchases. As a licensed credit broker, we provide access to a range of borrowing and leasing arrangements through a leading industrial finance company.

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