As the Budget originally scheduled for Autumn has been postponed until Spring 2021, the Government has recently made a number of announcements regarding tax. 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.