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£1m Annual Investment Allowance extended to 2022
A £1m tax break to stimulate investment in UK manufacturing and to support business confidence, is to be extended, HM Treasury has announced.
Businesses, including manufacturing firms, can continue to claim up to £1m in same-year tax relief through the Annual Investment Allowance (AIA) for capital investments in plant and machinery assets until 1 January 2022. The extension of the temporary £1m cap was originally due to revert to £200,000 on 1 January 2021.
The government said the move is intended to boost confidence as companies look to weather the pandemic and plan for the future.
Financial secretary to the Treasury, Jesse Norman, said: “It is vital that we support business through the difficult months ahead. Extending the Annual Investment Allowance’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow, whilst benefitting the wider economy too.”
Steve Watts, a partner at accountancy and business advisory firm BDO, said: “Many manufacturers have gone into survival mode in 2020 amid Covid-19 and Brexit uncertainty, and have had to defer investments in plant and machinery assets.
“Our most recent survey conducted with Make UK revealed a worrying decline in investment intentions among manufacturers, which does not bode well for an industry seeking to boost its productivity and compete in the global market.
“The one year extension to the Annual Investment Allowance cap of £1 million to 1 January 2022 is therefore hugely welcome and is aimed at encouraging investment in plant and machinery during these uncertain times. However, this is yet another short term measure when the industry is crying out for a comprehensive government strategy which provides greater certainty and allows for longer term investment planning.”