SMEs have been boosted by an announcement from George Osborne that there will be a rise in the Annual Investment Allowance.
As part of his Autumn Statement speech, chancellor George Osborne has outlined plans for a tenfold increase in the allowances on capital spending on items including tools and equipment.
The decision marks a change from a move previously made by the coalition government, which cut the amount from £100,000 to £25,000.
Osborne’s announcement now means that SMEs will be able to claim 100 per cent tax relief on capital investments.
To sit alongside the increase in the Annual Investment Allowance, Osborne also revealed plans to extend a scheme which allowed SMEs to receive relief of 100 per cent on properties with rents of up to £6,000. It will now run until April 2014 having initially been set to run to April 2013.
Speaking during the Autumn Statement, Osborne explained, ‘I’d like to help small and medium sized firms more, […] I am therefore going to increase by tenfold the Annual Investment Allowance in plant and machinery.
Instead of £25,000 worth of investment being eligible for 10 per cent relief, £250,000 worth of investment will now qualify. This capital allowance will cover the total annual investment undertaken by 99 per cent of all the business in Britain.
‘It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs. I want Britain to have the most competitive business tax regime of any major economy in the world.’
Ben Austin, CEO of digital marketing agency SEO Positive, comments, ‘The coalition has repeatedly said since coming to power that economic recovery will be led by entrepreneurs and SMEs, this may well be the case and it is encouraging to hear the chancellor incentivise investment in small businesses by raising tax relief to 100 per cent on an investment of up to £250,000.
‘But what about growing, established businesses? I own a business that is growing and I am proud to have created 20 jobs in the last three years but because we are growing we have now moved onto Standard Rate Accounting meaning that we will now pay VAT on invoices that we pay even if our debtors don’t…what about cutting that for a couple of years, I think the ‘M’ in SME is often forgotten!’
David Bennett, tax partner at Moore and Smalley, adds, ‘Businesses will welcome the rise in the amount of capital investment that qualifies for tax relief from £25,000 to £250,000.
‘This is a huge and unexpected increase that should encourage businesses to invest in plant and machinery and enable them to create new jobs.’
More on the Annual Investment Allowance: