I have recently seen that there has been an increase in the rate of Annual Investment Allowance (“AIA”) which can be claimed by businesses from £25,000 to £250,000 from 1 January 2013. Does that mean that my business will be able to claim the full £250,000 on capital expenditure even if the year-end is within 2013? You are correct, the Government along with HM Revenue and Customs (“HMRC”) announced in the Autumn Statement that the level of AIA will be increased from £25,000 to £250,000 for two calendar years starting from 1 January 2013 until 31 December 2015 when it is proposed that the rate will drop back down to £25,000 (although this may change in future legislation). On the face of it, this looks a simple change and that from the beginning of 2013 there will be a ten-fold increase in the amount of capital expenditure which can receive a 100% writing down allowance. However, it is not as simple as this and the amount of expenditure which can be included depends on two things, the businesses (Limited Companies, Partnerships - including LLPs and sole traders) year end and the date the expenditure is incurred as the HMRC guidance states that the rates will be time apportioned across the 1 January 2013 date. The effect of the time apportionment is best shown by way of the example below. This shows the effect on a business with a year end of 31 March 2013. Example: The business spans the date of the change so it will be necessary to apportion the AIA into the £25,000 and £250,000 limits before and after 1 January 2013. A. The period from 1 April to 31 December 2012 (9-months) will receive an AIA allowance of: 9/12 x £25,000 = £18,750. B. The period from 1 January to 31 March 2013 (3-months) will receive an AIA allowance of: 3/12 x £250,000 = £62,500 In total, the individual is entitled to a maximum AIA claim for the year of £81,250 (£18,750+£62,500). However, only capital expenditure incurred after 1 January 2013 will be covered by the uplift. If the individual incurred for example £30,000 of capital expenditure in October 2012 and none after 1 January 2013, he will only receive £18,750 of AIA and the balance will only receive normal writing down allowances and the post 1 January allowance cannot be utilised. Obviously, there are little planning opportunities that can be completed for year ends ending in February and March 2013 however, it will be possible to plan for expected capital expenditure over the next two calendar years to ensure clients are not caught out when the reverse apportionment occurs at the end of December 2015.