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'Arithmetic intricacies' of Investment Allowance could catch firms out, ATT warns

21 Feb 2023

The Association of Taxation Technicians (ATT) has warned that 'strange arithmetic intricacies' associated with the permanent increase in the Annual Investment Allowance (AIA) could catch out businesses.

During the 2022 Autumn Statement Chancellor Jeremy Hunt permanently increased the AIA to £1 million from 1 April 2023. It has been at this level since 1 January 2019, but was originally only intended to be a temporary measure.

The ATT is calling for the government to amend its draft legislation to make sure businesses with accounting periods that straddle the 1 April 2023 date are entitled to the full AIA across any 12-month period.

Presently, firms with accounting periods running both before and after April 2023 will only be eligible for a pro-rata portion of the allowance in each period.

Commenting on the issue, Jon Stride, Vice Chair of the ATT's Technical Steering Group, said: 'The absence of any change in the annual investment allowance limit between 31 March and 1 April 2023 might have been expected to avoid the strange arithmetic intricacies associated with the ending of a temporary increase.

'However, the legislation includes requirements concerning the second straddling period after 1 April 2023 which we worry would disproportionately affect some businesses. It is also likely to come as a surprise to many taxpayers given that there has been no effective change in the overall limit.'

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