The annual investment allowance (AIA), which allows businesses to claim full tax relief on most plant and machinery expenditure, has now been reduced from £100,000 to £25,000.

The AIA enables businesses to claim full tax relief on most plant and machinery expenditure in the tax year it is incurred.

Its reduction occurs as part of Government plans to shift the focus onto simplification and cash flow incentives for smaller businesses.

HMRC hopes that accelerated cuts to the corporation tax rate will offset the reductions in AIA and promote higher levels of small business investment.

The measure took effect from 1 April for businesses liable to pay corporation tax, and 6 April 2012 for businesses within the charge to income tax.

 

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