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SMEs risk missing out on annual investment allowance benefits

Written by Dara Jegede on Monday, 27 January 2014. Posted in Investment, Finance

Less than a third of surveyed SMEs are aware of the temporary increase in the annual investment allowance (AIA)

SMEs risk missing out on annual investment allowance benefits

As Britain continues to beat back the recession blues, a few monetary policies have been introduced to hoist business owners out of the mire. One such measure was an increase in the annual investment allowance (AIA) from £25,000 to £250,000, providing a time-limited incentive until December 2014 for businesses to invest in plant or machinery.

An opportunity for any SME to relish, you may think. However, a recent survey showed that SMEs are not taking advantage of the increase. The study carried out by Lombard, the asset finance provider, revealed that only a fifth of respondents had made use of the allowance last year, and that less than a third were even aware of the additional grant, meaning many risk missing out on the benefit.

Some on-the-ball SMEs have managed to take advantage of the measure though, including Bluesky, a company that provides aerial photography and thermal imagery. It purchased state of the art equipment in early 2013 using a hire purchase agreement, thus enabling the company to benefit from the increased AIA.  A smart move by the company, and it’s not surprising that 43% of those surveyed said that their decision to invest would have been affected had they been aware of the increase.

“We will be able to receive a full deduction against our taxable profits on the first £250,000 of the cost of the equipment which, for a business of our size, is a substantial benefit,” said Rachel Tidmarsh, managing director of Bluesky. “Significantly it will enable us to reinvest in additional equipment that we otherwise wouldn't have been able to afford so soon.”

Richard Hemsley, managing director of Lombard, encouraged SMEs to speak to their finance advisers to find out how they can make the most of this temporary increase in AIA.

For more information on the AIA we recommend a visit to the HMRC website. 

 

About the Author

Dara Jegede

Dara Jegede

Jegede recently left the London School of Journalism having previously embarked on a soul-searching stint in the city of love. That's Paris, by the way.

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