Part 1: Principal rates etc. Section 8: Annual investment allowance Details of the section
Subsection (1) amends section 51A(5) of the Capital Allowances Act (CAA) 2001 so that the maximum AIA that can be claimed for a 12 month chargeable period is increased from £25,000 to £200,000.
	Subsection (2) provides that subsection (1) has effect for expenditure incurred on or after 1 January 2016.
	Subsection (3) provides that for chargeable periods which straddle 1 January 2016, the transitional provisions of paragraphs 4 and 5 of Schedule 2 to Finance Act 2014 apply.
	Paragraph 4 of Schedule 2 to Finance Act 2014 provides the transitional rules for chargeable periods that straddle 1 January 2016. It treats the actual chargeable period as two separate chargeable periods; one ending on 31 December 2015 and one commencing on 1 January 2016. The maximum allowance for the whole of the actual chargeable period is the sum of the maximum amounts calculated for each of these two separate periods. It provides a further restriction for the second period commencing on 1 January 2016 such that for expenditure from that date no claim can be made for more than the maximum for that second period.
	So, for example, a company with a chargeable period, from 1 April 2015 to 31 March 2016, would calculate its maximum AIA entitlement for the whole period based on:
	the proportion of the period from 1 April 2015 to 31 December 2015, that is, 9/12 x £500,000 = £375,000, and,
	the proportion of the period from 1 January 2016 to 31 March 2016, that is, 3/12 x £200,000 =£50,000.
	The company’s maximum AIA for the whole period would, therefore, be the sum of (a) + (b) = £425,000.
	If the company incurred no qualifying expenditure in the period 1 April 2015 to 31 December 2015 and then spent, say, £60,000 in the period 1 January 2016 to 31 March 2016, the maximum AIA available to that company for expenditure in that particular part period would be limited to £50,000. Writing-down allowances would then be available for the remaining unrelieved £10,000.
	Paragraph 5 of Schedule 2 to Finance Act 2014 applies where a single AIA has to be shared between two or more persons. For details, reference should be made to the Explanatory Notes to section 10 Finance Act 2014.