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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Deductions from earnings: capital allowances: calculation of the allowances due: Annual Investment Allowance: general

Sections S38A and S38B, S51A to S51N CAA 2001

Annual Investment Allowance is effectively a 100% first-year allowance for business expenditure on almost all plant or machinery (apart from cars).

Between 6 April 2008 and 5 April 2010 the AIA annual amount was £50,000.

Between 6 April 2010 and 5 April 2012 the AIA annual amount was £100,000.

Between 6 April 2012 and 31 December 2012 the AIA annual amount was £25,000

Between 1 January 2013 and 5 April 2014 the AIA annual amount was £250,000.

From 6 April 2014 to 31 December 2014 the AIA annual amount will be £500,000 after which it will return to £25,000

There is more detailed guidance at CA23080 onwards. The AIA replaces the previous 40% or 50% FYA for expenditure by individuals (see CA23160) but it does not replace other existing FYA schemes as detailed in CA23100.

  • The AIA must be claimed by a ‘qualifying person’. The definition of a ‘Qualifying person’ includes an individual carrying on a qualifying activity (this includes trades, professions, vocations, ordinary property businesses and employments or offices).
  • The qualifying person must incur qualifying expenditure on or after the relevant date, see CA23083.
  • The qualifying expenditure must be AIA qualifying expenditure. This definition covers almost all plant or machinery expenditure, subject to a small number of general exclusions.
  • If the chargeable period is more or less than a year, that amount must be proportionately increased or reduced, and the AIA does not have to be claimed in whole or in part.
  • There are certain restrictions on entitlement (see CA23087), for example, where the AIA is claimed in relation to an asset which is partly used for non-business purposes.
  • A person must incur the AIA qualifying expenditure on or after the relevant commencement date that is 6 April 2008.

An employment or office may be a qualifying activity for capital allowances purposes (see CA20010). Usually, an employer will provide any necessary equipment (for example a computer) if an employee is expected to work from home, but exceptionally, there may be cases where the employee provides the equipment and can claim an AIA. This is subject to the capital allowances contributions rules (see CA14100) in cases where the employer in fact meets the expenditure either directly or indirectly, and to the rules about non-qualifying use (see CA23087).


The AIA is not available on expenditure incurred -

General exclusion 1: in the chargeable period in which the qualifying activity is permanently discontinued;

General exclusion 2: on the provision of a car CA23510;

General exclusion 3: wholly for the purposes of a North Sea ring fence trade CA23157;

General exclusion 4: where the asset is provided in connection with a change in the nature or conduct of a business carried on by someone else and the main benefit, or one of the main benefits, that could reasonably be expected from the change is obtaining an AIA. This is an anti- avoidance provision intended to stop a business that is not entitled to, or has exhausted its entitlement to, an AIA from getting round the AIA restrictions by effectively transferring the asset to another business that has not used up its entitlement.