Thousands of SMEs are missing out on a major government tax break that enables them to invest up to £1 million in plant and machinery while reducing their tax bills.
The Annual Investment Allowance has been increased from £200,000 to £1 million since January 2019 and will be offered until the end of 2020.
This gives a two-year incentive for businesses to accelerate capital investment decisions, as they can claim tax relief on the increased amount, substantially reducing their tax bills.
However, Close Brothers Asset Finance warns that only 13% of firms plan to significantly increase investment in 2019 as a result of the rise and 58% are not aware of the increase.
Neil Davies (pictured), chief executive officer of Close Brothers Asset Finance, said: “The AIA provides significantly faster tax relief for plant and machinery and is a great way for firms to invest in the tools and equipment that could transform their business.
“However, it is clear that more needs to be done to get the message out to business owners because the AIA was always intended as an economic stimulus by the Government.
“A knock-on effect of this lack of knowledge is that company owners aren’t taking advantage of the increase to invest in their business.”
Alan Cooper, finance director at Liberty Leasing, said that businesses do not need to buy the assets outright; in most cases they can hire purchase the assets and receive the full allowance.
He added: “The AIA provides businesses with 100% tax relief, in the year of purchase, for many business assets. Qualifying assets include plant and equipment, machines and tools, vans, lorries and diggers, although it does not apply to cars.”
