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News - 11 December 2012

Annual Investment Allowance (AIA) increased.

One of the most significant announcements made during the Chancellor’s Autumn Statement was the temporary increase of the Annual Investment Allowance from £25,000 to £250,000.

The new threshold will apply to qualifying investments in plant and machinery for two years from 1st January 2013, and is aimed to stimulate investment by smaller companies in particular.

This is a reversal of the policy which saw the rates reduced from £100,000 to a mere £25,000. The new limit is expected to cover the total investment made by 99% of the UK’s businesses.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The tenfold increase equates to a £45,000 grant to any business that wants to grow by investing in new equipment.”

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“The increase will be welcomed by businesses who will find this helpful to their cashflow situation if they are investing out of profit, as the tax relief will be accelerated.”

Other measures of interest to limited company owners

Other points of interest for limited company owners in particular, include:

  • An additional 1% cut in the main rate of Corporation Tax – to 21% from April 2014. The ‘small profits’ rate paid by smaller companies remains at 22%, for profits of £300,000 or less per year.
  • A reduction in the tax-free pension contributions limit from £50,000 to £40,000 from 2014/15.
  • The lifetime pensions contributions limit will be reduced from £1.5m to £1.25m from 2014/15.
  • Plans to implement the UK’s first General Anti-Abuse Rule (GAAR) to clamp down on tax avoidance.
  • Confirmation that the Government will invest £1bn in a new Business Bank.
  • Facilitate UK Export Finance (UKEF) to provide up to £1.5bn in new lending to finance small companies’ exports.
  • The doubling of the Small Business Rate Relief scheme will continue for another year from 1st April 2013 – 500,000 small businesses are expected to benefit.
  • Small self-employed businesses will be able to calculate their tax liabilities on a cash basis from April 2013 – if their annual receipts are £77,000 or less.
  • The ‘controlling persons’ proposals to tax influential interims and consultants on a PAYE basis have been shelved, as the IR35 rules already exist to deal with such cases.
  • The basic and higher rate income tax allowances are to rise over the next two years, but by far less than the rate of inflation.

If you need any help and advice for your business on Corporation Tax and Allowances or any other implications of the 2012 Autumn Statement, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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