Despite a temporary two-year boost in the Annual Investment Allowance (AIA), research from Braemar Finance has found that UK SMEs have no firm plans to take advantage of the increase.
From 1 January 2019 to 31 December 2020 an increase in the AIA has been introduced by the government from the previous limit of £200,000 to £1m.
This is to enable faster tax relief for qualifying assets, with the aim of helping businesses to invest and grow.
Introduced in 2008, it is an allowance meaning a business can write off 100% of qualifying capital expenditure against taxable profits for the same period.
A key finding of the survey established that well over half (58%) of SMEs aren’t aware that the government had made the increase to the AIA, while only a minority of companies (13%) are planning to significantly increase investment in 2019 as a result of the rise.
‘The AIA provides significantly faster tax relief for qualifying assets and is a great way for firms to invest in the equipment that could transform their business,’ said Aileen Boyle, MD, Braemar Finance.
‘However, it’s 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 business owners aren’t taking advantage of the increase to invest in their business.’
AIA is available for most assets purchased by a business, including equipment, building fixtures and computers.
For more information visit www.braemarfinance.co.uk.