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As more economies around the world open up and companies bring employees back to the office, global expansion plans that may have been put on hold last year are now taking shape. It can be challenging to know where to start, but here are some key factors to consider when expanding your operations into new countries.
Capital allowance increase
The Annual Investment Allowance (AIA) provides a tax write-off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property
In the Autumn Statement in December 2012, the Chancellor announced a temporary increase in the amount of AIA available from £25,000 to £250,000 for expenditure incurred on or after 1 January 2013. This temporary increase was originally due to end by 1 January 2015.
The 2014 Budget increased the amount of the AIA to £500,000 from 1 April 2014 for companies (or 6 April 2014 for unincorporated businesses) until 31 December 2015 but it is still described as temporary. This means that the AIA will revert to £25,000 after 31 December 2015.
As such, anyone considering their UK capital expenditure plans should think about ensuring any significant qualifying costs are incurred before the temporary rate is reduced in January 2016. Expenditure incurred after the 100% AIA is reduced will only qualify for annual writing down allowances of between 8% and 18%
Are there any exclusions?
In some circumstances, a company may not be entitled to the AIA as the AIA limits may need to be shared with other businesses if they are under common ownership. Certain companies are also not entitled to any AIA and AIA is not available on expenditure for cars.
In some circumstances, there are special rules for determining the date of when capital expenditure is incurred for tax purposes.