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Maximum AIA calculations for split accounting periods

Source: HM Revenue & Customs | | 28/01/2019

The recent, and temporary, increase in the AIA to £1m from 1 January 2019 creates computational issues if a trader's accounting period straddles this date.

The following example published by HMRC illustrates one variant that you may encounter when considering AIA relief due to clients.

Where a business has a chargeable period from 1 July 2018 to 30 June 2019, the maximum AIA for this period would be £600,000 calculated as follows:

a) the proportion of the period from 1 July 2018 to 31 December 2018, that is, 6/12 x £200,000 = £100,000 and

b) the proportion of the period from 1 January 2019 to 30 June 2019, that is 6/12 x £1,000,000 = £500,000

£100,000 + £500,000 = £600,000.

However, in relation to (a), the part period falling before 1 January 2019, no more than a maximum of £200,000 of the company’s actual expenditure in that particular part period would be covered by its transitional AIA entitlement (the maximum claimable before the increase on 1 January 2019).

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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