Firms lack awareness of increase in Annual Investment Allowance

From 1st January 2019 to 31st December 2020 a temporary increase in the AIA has been introduced by the government. This is to enable faster tax relief for plant and machinery investments between £200,000 and £1 million, with the aim to help businesses to invest and grow.

However, the latest survey by the MTA and Close Brothers Asset Finance has found that despite the increase in AIA manufacturing and engineering firms are not changing their plans to invest in new equipment. The survey found that only 42% of engineering and manufacturing firms were aware that the Government had made an increase AIA.

The survey also found that only a minority of companies (40% overall, 45% in Engineering/Manufacturing) are planning to increase investment in 2019 as a result of the rise in the AIA.  While that sounds like a reasonable rate, only 15% overall respondents and 16% of engineering and manufacturing companies were planning a significant increase, with 25% and 29% respectively saying it would only be a small increase on their original intentions.

James Selka, CEO of the MTA, said “The increase to the Annual Investment Allowance is a great opportunity for UK manufacturing and engineering firms to invest in new equipment and embrace new technologies that could transform their businesses. More needs to be done to get the message out there to invest and more support is needed to help stimulate these purchases.”

He added “The MTA was pleased to see that the Budget included the expansion of the Annual Investment Allowance from £200,000 to £1,000,000. This was a specific ‘ask’ from the MTA and will make investing in new equipment more cost-effective and give the UK the opportunity to be more competitive on an international stage. Now companies need to use this allowance and invest in their future”

Steve Gee, CEO of Close Brothers Asset Finance's industrial equipment division, said “The Annual Investment Allowance is there to help companies invest in their future. Close Brothers Asset Finance are at hand to support and guide companies through this process and ensure they are maximising their return on investment.”