HMRC cracks down on annual investment allowance claims
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
23 February 2024
Following businesses claiming more annual investment allowance (AIA) than they are entitled to, we delve into the details of HMRC’s response.
Annual investment allowance (AIA) provides a 100% tax deduction on qualifying expenditure up to an annual limit (currently £1 million). Unlike full expensing, it’s available to both unincorporated businesses and companies, although it’s not available to partnerships unless all the members of the partnership are individuals.
In some cases, it is necessary for businesses under common control to share the AIA limit. For example, a group of companies is only entitled to a single AIA limit and, where there are two or more groups of companies under common control, they will only be entitled to a single AIA limit between them if they are 'related' to each other. Where companies are not in a group, but are under common control, they may also be required to share a single AIA limit where they are ‘related’ to each other. This rule also applies to unincorporated businesses under common control if they are ‘related’ to one another.
'One to many' letter campaign
HMRC has advised us that it has recently sent a ‘one to many’ letter to companies in the categories listed above who have claimed more than the annual limit. This could be an oversight on the part of the companies or their tax agent(s). Such a scenario could quite easily happen if different agents act for the companies, as sometimes the AIA claim details of another company are not readily available.
Our understanding is that these letters are only being sent directly to the companies and a copy isn’t being sent to the agent on HMRC’s record. The letter gives the companies 30 days to either correct the corporation tax return previously submitted or to contact HMRC to advise why they believe that the correct AIA claim has been made.
HMRC has provided ICAS with a copy of the letter so that we can share this on our website for reference.
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