Business could benefit by an opt-out from increase in AIA

The Association of Taxation Technicians has raised concerns that the temporary increase in the annual investment allowance (AIA) from £200 000 to £1m for two years from 1 January 2019 will reduce the tax relief available to some businesses. It wants an opt-out clause to be added to overcome the adverse consequences for small and medium-sized businesses without affecting the larger organisation that will benefit most from the increase.

Jon Stride co-chair of ATT’s technical steering group said: ‘The problem arises for small and medium-sized businesses in the accounts year during which the temporary increase ends.

‘As drafted the Finance Bill provisions mean that a business with a year end of 31 March 2021 would have an effective AIA limit of £800 000 if it incurred all its qualifying expenditure for that year in the nine months to 31 December 2020. By contrast if the whole...