Annual investment allowance (AIA) is a 100% allowance for capital expenditure on plant and machinery (excluding cars) from 1 April 2008. The maximum amount of expenditure which may qualify for AIA is £50,000. Where an accounting period straddles 31 March 2008, transitional rules operate to apportion the AIA limit, to reflect the proportion of the accounting period falling after 31 March 2008, eg, for a company with year end of 31 December 2008, nine months of the accounting period would fall after 31 March 2008 and therefore the AIA limit would be restricted to 9/12 x £50,000, ie £37,500.
The legislation permits the calculations to be apportioned either on a daily or monthly basis.
A limitation has been identified in HMRC online filing system in this area. The service will accept calculations based on the daily time apportionment basis but not currently the monthly basis. In the circumstances calculations should use the daily time apportionment basis for all AIA calculations for the moment.
HMRC expect that the service will support the monthly basis of calculation from April 2010.
For further advice on this this, or any other technical matter, please contact the Advisory Services helpline on +44 (0)20 7059 5920.