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Most SMEs unaware of investment allowance boost

The government has introduced a temporary two-year boost to the Annual Investment Allowance (AIA) tax relief scheme for new plant and machinery, but less than half of SMEs are aware of it.

The AIA allows businesses to write off the full value of eligible capital investments against their taxable profits in the year of purchase. It is applicable to most assets, including machines and tools, vans and lorries (but not cars), office equipment, building fixtures and computers.  

From 1 January 2019 to 31 December 2020, the government has increased the annual allowance from £200,000 to £1 million to help businesses invest and grow. 

However, in a survey of 900 SMEs across several industries in the UK and Ireland, 58 per cent were unaware of the temporary boost. Furthermore, only 16 per cent of manufacturers were planning a significant increase in their investment plans as a result.  

Neil Davies, Chief Executive of Close Brothers Asset Finance, which commissioned the research, 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, its 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 arent taking advantage of the increase to invest in their business. 

 

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