More allowances

Budget note BN4 from this year’s Budget announced the temporary reintroduction of a 40% first year allowance (FYA) for expenditure in 2009/10 only.

Paragraph 9 of the note implied that this allowance would be available for expenditure above the annual investment allowance (AIA) limit of £50 000. The legislation introducing the temporary FYA is in FA 2009 s 24.

Despite reading this on numerous occasions I am unable to see how this allowance dovetails with AIA. To my mind there appears just as much logic for taking FYA first followed by AIA rather than the other way round which is what HMRC suggest.

Suppose I have a client who has incurred £100 000 on a single piece of plant and machinery in 2009/10. What allowances will he get?

CAA 2001 s 58(4A) directs that I should allocate the AIA qualifying expenditure...