Fife’s manufacturing and engineering businesses are being inspired to take advantage of an increase of the Annual Investment Allowance (AIA).
The encouragement from Fife Council Economic Development comes following a survey, which highlighted that manufacturing and engineering businesses aren’t planning to take advantage of the increase, which enables faster tax relief for plant machinery investments between £200,000 and £1 million.
The survey, undertaken by the Manufacturing Technologies Association and Close Brothers Asset Finance, found that despite an increase in AIA until 31st December 2020, that only 42 per cent of engineering and manufacturing firms were aware of the increase.
Findings also highlighted that only a minority (45 per cent of engineering and manufacturing companies) are planning to increase investment this year, as a result of an increase in AIA. Of those, only 16 per cent were planning a significant increase.
Pamela Stevenson, Lead Officer, Fife Council Economic Development, said: “We’re keen to encourage more local businesses to embrace the Government’s increase in the Annual Investment Allowance and invest in their future. It offers a superb platform for local manufacturing and engineering businesses to invest in new equipment, embrace new technologies, to improve efficiencies and ultimately become more competitive.”
The temporary increase enables businesses to obtain 100 per cent tax relief on the purchase of qualifying business assets in the year of purchase such as plant, machinery, vans and tools. Helpfully, AIA can also be claimed on hire purchase assets. If a business utilises their full AIA of £1 million, this equates to corporation tax savings of £190,000.
Ross Oliphant, Tax Partner at EQ Accountants and Head of its Engineering and Manufacturing Group, said: “The increase in the Annual Investment Allowance provides a great opportunity for UK engineering and manufacturing businesses to invest in new plant and machinery whilst accelerating their tax relief. Those that invest in assets critical to their business will not only benefit from the tax reliefs, but should enjoy greater productivity and growth.”
Whilst this is a welcome change, businesses with a year end that straddles 1 January 2019 should be aware of the transitional rules that apply, meaning the timing of capital expenditure should be carefully planned to ensure the AIA is maximised.
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