HMRC have extended the AIA to stimulate investment!

To boost confidence and encourage investment through the economic impacts of Covid-19, the Annual Investment Allowance £1,000,000 temporary cap has been extended until 1 January 2022.The £1m cap was due to revert to only £200,000 on 1 January 2021, but the recent extension announcement by HM Treasury sets to provide key stimulus for investors into next year.

Capital allowances enable commercial property owners to obtain tax relief relating to capital expenditure incurred on their commercial properties. Allowances are available where a commercial property has been purchased, constructed, fitted out, refurbished, or extended.

For property investors (subject to tax here in the UK) this means that until 1st January 2022 you are able to write off 100% of current year expenditure, up to a total of £1m, and deduct this from your profits before you pay tax. It means 2021 will continue to be a good time to invest in commercial property.

What qualifies for capital allowances and the magic one million pounds of expenditure?

All those features installed within the property to make it fit for the purpose of its trade. Qualifying items such as kitchens, bathrooms, electrical works, security systems, lifts, general power, hot and cold-water installations and further ancillary fees in connection with building works, qualify.

It’s also worth noting that expenditure incurred just before, as opposed to just after your accounting year-end, will mean you benefit the from the tax relief one year sooner.

If you are purchasing, refurbishing or building commercial property and want to understand how to ensure you are getting the maximum tax relief, please contact we would be delighted to help.