Richard Curtis outlines the conditions and restrictions on the use of the annual investment allowance.
Explaining capital allowances to clients can cause confusion. After all, like many other business expenses, the cost of a capital item may have been incurred as a single payment, so why should full tax relief not be available in that year in the same way as revenue expenditure? To a substantial extent, the annual investment allowance (AIA) solves this problem by advancing the tax relief that would previously have had to be claimed over a perhaps indefinite period through writing-down allowances. Legislation relating to the AIA is in CAA 2001, Pt 2 Ch 3A (AIA qualifying expenditure) and at Pt 2 Ch 5 (AIA, ss 51A-s51M) and all references in this article are to CAA 2001, unless stated otherwise.
Ups and downs
The annual investment allowance was introduced in 2008 with an
