SMEs unaware of £1 million tax break

Recent research suggests that only a small percentage of the UK’s small and medium-sized enterprises (SMEs) plan to increase investment this year, and many businesses are potentially 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 (AIA) increased from £200,000 to £1 million at the beginning of the year and applicants will be offered this until the end of 2020. The Allowance gives businesses an incentive to accelerate capital investment decisions, as they can claim tax relief on the increased amount, and reduce their tax bills significantly.

However, the research suggests that only 13 per cent of firms plan to significantly increase their investment in 2019 as a result of the increase and that a whopping 58 per cent of firms are not even aware of it.

As one of the report’s authors commented, the Allowance provides significantly faster tax relief for plant and machinery and is an excellent way for firms to invest in the tools and equipment that could transform their business.

He added that more needs to be done to get the message out to business owners though because the AIA was always intended as an economic stimulus by the Government.

One thing business leaders might not know is that they do not even need to buy the assets outright and, in most cases, they can hire purchase the assets and receive the full allowance. Qualifying assets include plant and equipment, machines and tools, vans, lorries and diggers, although cars do not qualify.

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