The Budget proposes the introduction of a temporary first year allowance for all businesses at a rate of 40% on qualifying capital spend incurred in the one-year period from April 2009. This will be in addition to the Annual Investment Allowance, which is a 100% allowance that was introduced from April 2008.

Baker Tilly analysis

The Budget proposes the introduction of a temporary first year allowance for all businesses at a rate of 40% on qualifying capital spend incurred in the one year period from 6 April 2009. This will be in addition to the Annual Investment Allowance (AIA), which is a 100% allowance available that was introduced from 6 April 2008.

In detail

Since 6 April 2008, businesses have been able to claim an AIA at 100% of £50,000 of qualifying spend in a 12-month accounting period.

In addition to the AIA to which it may be entitled, the proposal is to allow each business to claim a 40% first year allowance on qualifying spend incurred in the one year from 6 April 2009 in place of the existing 20% writing down allowance.

Expenditure which will qualify for the temporary first year allowance will exclude expenditure on cars, assets held for leasing  and on expenditure which falls to be included in a separate 10% special rate pool.