Autumn Statement - Chancellor Announces Measures to Encourage Business Investment
5th December 2012
George Osborne announced today an unexpected rise in the ‘Annual Investment Allowance (AIA)’ available to businesses investing in qualifying plant and machinery. The AIA will rise from £25,000 to £250,000 from 1 January 2013 for two years. This will mean that £250,000 of qualifying investment into machinery, business premises, expansion, etc in each year will be fully relievable against the businesses profits to reduce the amount of corporation or business tax payable. The move is designed to encourage and incentivise business investment, especially amongst small and medium sized firms.
The chancellor also announced an additional cut in the main rate of corporation tax which will take the rate down from 24% in 2012, to 23% in April 203 and then to 21% in April 2014. These rates apply to businesses with profits above £1.5million. Smaller businesses did not receive any corresponding reductions in corporation tax rates which remain at 20%.
The Government also announced plans to exempt newly built commercial property completed between 1 October 2013 and 30 September 2016 from empty property rates for the first 18 months – subject to consultation and state aids limits.
Viewpoint
The regular changes in AIA levels introduced in successive budgets has been frustrating to businesses and has meant that planning investment has been difficult. This new increase is almost immediate and substantial and may well be enough to encourage much needed business investment. The AIA works alongside the main rates of capital allowances which range from 8% per annum on a reducing basis to 100% for certain energy efficient installations.