Details of the Section
2.Subsection (1) amends subsection (5) of section 51A of the Capital Allowances Act 2001 (CAA) so that the maximum AIA that can be claimed for a 12 month chargeable period is increased from £50,000 to £100,000.
3.Subsection (2) provides that the increase in the limit has effect in relation to expenditure incurred on or after the relevant date. “Relevant date” is defined in subsection (6) as 1 April 2010 for CT purposes and from 6 April 2010 for income tax purposes.
4.Subsection (3) provides that where a chargeable period spans the relevant date then subsections (4) and (5) apply.
5.Subsection (4) provides that the maximum allowance is the sum of each maximum allowance that would be found if the actual chargeable period were split into two chargeable periods. The first beginning with the first day of the chargeable period and ending with the day before the relevant date. The second beginning on the relevant date and ending with the last day of the chargeable period.
6.So where a business has a chargeable period that spans the relevant date of the increase, the maximum allowance for that business’s transitional chargeable period is the sum of:
the maximum AIA entitlement, based on the previous £50,000 annual cap for the portion of a year falling before the relevant operative date; and
the maximum AIA entitlement, based on the new £100,000 cap for the portion of a year falling on or after the relevant date.
7.For example, a company with a calendar year chargeable period from 1 January 2010 to 31 December 2010 would calculate its maximum AIA entitlement based on:
the proportion of a year from 1 January 2010 to 31 March 2010, that is, 3/12 x £50,000 = £12,500; and
the proportion of a year from 1 April 2010 to 31 December 2010, that is 9/12 x £100,000 = £75,000.
The company’s maximum AIA for this transitional chargeable period would therefore be the total of (a) + (b) = £12,500 + £75,000 = £87,500.
8.Subsection (5) effectively provides that in the part of the chargeable period falling before 1 April 2010, only a maximum of £50,000 of the company’s expenditure would be covered (in other words the previous AIA limit would apply). Returning to the example above, this rule does not affect the business’s maximum AIA for the chargeable period as a whole (which is £87,500) simply the amount of expenditure before the relevant start date that may be covered.
9.For example, a company with a calendar year chargeable period would have a maximum entitlement under subsection (4) of £87,500, but if the company spent, say, £70,000 in February 2010 and incurred no other qualifying expenditure for the remainder of the year the maximum AIA available to that company would be £50,000.