Why are engineering and manufacturing firms ‘missing out’ on the increased AIA?

Category: Engineering & Manufacturing - Posted On: Jul 9 2019

The Autumn Budget announced the temporary increase in the Annual Investment Allowance (AIA) limit, from £200,000 to £1million. This increase will remain until 31 December 2020, meaning businesses will have a two-year window to take advantage of this higher limit.

The increase to the AIA will allow engineering and manufacturing businesses to obtain 100% tax relief on the purchase of qualifying business assets in the year of purchase such as plant, machinery, vans and tools. However, a recent survey, by the Manufacturing Technologies Association (MTA) and Close Brothers Asset Finance, found that only 42% of engineering and manufacturing firms were aware of the temporary increase, and many are not planning to take advantage of the increase at all.

Partner and Head of EQ Engineering & Manufacturing, Ross Oliphant, commented;

“Manufacturing and engineering businesses should use the increase as a great opportunity to invest in essential equipment, which will enable faster tax relief for assets critical to their business. We’ve advised a number of our clients within the sector to utilise the temporary increase as it will not only benefit from the tax reliefs, but should encourage greater productivity and growth.”

With the temporary limit being the highest we have seen since the AIA was introduced in 2008, there has never been a better time for engineering and manufacturing firms to invest in their business assets.

Whilst this is a welcome change, businesses with a year end that straddles 1 January 2019 should be aware of the transitional rules that apply, meaning the timing of capital expenditure should be carefully planned to ensure the AIA is maximised.

For further information on AIA, and the amounts that can be claimed, please contact Head of EQ Engineering & Manufacturing, Ross Oliphant, or contact our Glenrothes office on 01592 630055.