Introduction Details of the Schedule
4.Paragraph 1(1) explains that the paragraph applies to a chargeable period that begins before 1 January 2013 and ends on or after that date. Such a period is referred to as "the first straddling period".
5.Paragraph 1(2) provides that the maximum allowance for such a period will be the sum of each maximum allowance that would be found if the actual chargeable period were split into separate chargeable periods by reference to the 'relevant date' and the date of the temporary increase. The 'relevant date' is given by paragraph 1(4) and is the date of the last change in the maximum amount of the AIA (when the maximum amount was reduced from £100,000 to £25,000). For the purposes of corporation tax (CT) this date was 1 April 2012 and, for the purposes of income tax, this date was 6 April 2012.
	The first periodBecause some business may have a chargeable period that began before “the relevant date” of 1 (or 6) April 2012, and so may be affected by the changes enacted by section 11 of Finance Act 2011, the first period is so much of the actual chargeable period as falls before 1 (or 6) April 2012. The legislation does not require that there has to be such a period, but where the chargeable period starts before 1 (or 6) April 2012 that period must be separately considered.
	The second periodThe second period is so much of the actual chargeable period as falls on or after 1 (or 6) Aril 2012, but before 1 January 2013.
	The third or last periodThe third period is so much of the actual chargeable period as falls on or after 1 January 2013.
6.So, where a business has a chargeable period of a year that straddles 1 January 2013, the maximum allowance for that period is the sum of:
7.Paragraph 1(3) provides that this calculation of the maximum allowance for “the first straddling period” is subject to paragraphs 2 and 3, which contain some additional rules about the maximum allowance for expenditure actually incurred in each of the three potential periods identified in paragraph 1(2). Paragraph 2 gives the additional rules for straddling periods beginning before 1 (or 6) April, and paragraph 3 gives the additional rules for straddling periods beginning on or after that date.
8.Paragraph 2(1) explains that the paragraph applies where the first straddling period begins before the relevant date of 1 (or 6) April.
For example, a company with a chargeable period from 1 March 2012 to 28 February 2013 would calculate its maximum AIA entitlement based on:
So, the company's maximum AIA for this first straddling period would be the total of (a) + (b) + (c) = £8,333 + £18,750 + £41,667 = £68,750.
9.Paragraph 2(2) effectively provides that in the part of the chargeable period falling before 1 (or 6) April 2012, the maximum allowance for expenditure actually incurred in this period, is the amount that would have been the maximum allowance for the first straddling period, if the temporary increase in the AIA to £250,000 had not been made. So, for expenditure incurred in period (a) of the example in paragraph 8 above, the maximum allowance would be:
10.Paragraph 2(3) provides that for expenditure actually incurred in the part of the chargeable period falling on or after 1(or 6) April 2012, but before 1 January 2013, the maximum allowance is the difference between two amounts, called 'A' and 'B.' 'A' and 'B' are defined in the next subparagraph 2(4).
11.Paragraph 2(4)(a) defines 'A', and paragraph 2(4)(b) defines ‘B'.
	‘A’ means the amount that would have been the maximum allowance for the period beginning on the relevant date and ending at the end of the first straddling period, assuming that the temporary increase in the AIA to £250,000 had not been made. In other words, applying this to our example at paragraph 8 above, the maximum allowance for expenditure incurred for the period beginning on 1 (or 6) April 2012 and ending on 28 February 2013 would have been (11/12 x £25,000) = £22,917. So, based on our example, the value of ‘A’ would be £22,917.
	‘B’ means the amount (if any) by which:(i)the AIA expenditure incurred in the period in paragraph 1(2)(a) of the Schedule (that is, in the period before the relevant date) in respect of which an AIA claim is made, exceeds(ii)the maximum allowance for that period, if it were to be treated as a separate chargeable period.So, returning to our example in paragraph 8 above, the two elements of ‘B’ may be seen as:(i)an amount in the range between £31,250 and nil for the first element. For example:if the business had actually incurred the maximum AIA expenditure it could in that part period, and was making a claim in respect of that expenditure, the maximum it could claim would be £31,250 (as already calculated at paragraph 9 above); orif the business had decided to work out its AIA entitlement on a strict time-apportioned basis, and to spend no more than that amount prior to ‘the relevant date’, the first element of ‘B’ would be £8,333 (in our above example at paragraph 9 above); orthe business might, of course, decide to spend a lesser amount than either of the two possibilities just mentioned, or it might, indeed, have incurred no relevant expenditure at all, in which case the first element of ‘B’ would be nil.From this first element of ‘B’ the following, second element falls to be deducted:(ii)The second element of ‘B’ is, based on our example, £8,333, that is, the maximum allowance the business could have claimed for that part period before the relevant date (i.e. 1/12 x £100,000 = £8,333) as if that period were treated as a separate chargeable period.
12.The rule, then, for expenditure actually incurred on or after 1 (or 6) April 2012, but before 1 January 2013, is that the maximum allowance for this expenditure cannot exceed (‘A’ – ‘B’). Applying this formula to our example would mean that the maximum allowance could not exceed ‘A’ or £22,917, less the extent to which the first element of ‘B’ exceeded the second element. So, for example:
	If the business had spent the maximum it could before 1 (or 6) April 2012, that is, £31,250, ‘B’ would equal (£31,250 – £8,333) = £22,917, and (‘A’- ‘B’) would equal (£22,917 - £22,917) = nil. In other words, the business would already have used up its maximum allowance for this part period, and would not be entitled to any further AIA in relation to further expenditure incurred on or after the relevant date, but before 1 January 2013.
	If, however, the business had spent and would be claiming on £8,333 before 1 (or 6) April 2012, ‘B’ would equal (£8,333 - £8,333) = nil, and (‘A’ – ‘B’) would equal (£22,917 – nil) = £22,917. In other words, the business’s maximum allowance, in relation to expenditure incurred on or after 1(or 6) April and before 1 January 2013, would be £22,917, although if it claimed on those two amounts (£8,333 + £22,917 = £31,250) in respect of expenditure incurred before 1 January 2013, it would only have £37,500 of its maximum entitlement (£68,750 - £31,250 = £37,500) left to cover its expenditure incurred on or after 1 January 2013. (See the calculation of the overall maximum entitlement at paragraph 8).
	Alternatively, if the business had incurred no qualifying expenditure in the part period before 1 (or 6) April 2012, ‘B’ would equal (£nil - £8,333) = nil (because no part of the expenditure actually incurred exceeded the second element of ‘B’) and (‘A’ – ‘B’) would equal (£22,917- nil) = £22,917. This means, in effect, that the entitlement for the part period to the relevant date would have been lost, to the extent that it had not been utilised by that date, observing the transitional provision already legislated in section 11(7) of Finance Act 2011 (when the maximum AIA was reduced from £100,000 to £25,000 from 1 (or 6) April 2012).
13.Paragraph 2(5) provides that, in relation to expenditure actually incurred in the part of the chargeable period falling on or after 1 January 2013, the maximum allowance is the sum of each maximum allowance that would be found if the periods mentioned in paragraph 1(2)(b) and 1(2)(c) of the schedule were each treated as separate chargeable periods. In other words, returning to the example at paragraph 8 above, in relation to expenditure incurred on or after 1 January 2013, a maximum total of (b) + (c) = £18,750 + £41,667 = £60,417 could be covered. But if, for example, no qualifying expenditure had been incurred before 1 (or 6) April 2012 (period (a) at paragraph 8 above), that part of the business’s potential maximum entitlement could not be effectively “regained” in relation to expenditure incurred on or after 1 January 2013. (Once again, this observes the rule legislated in section 11(7) of Finance Act 2011, in relation to the reduction in the AIA, effective from 1 (or 6) April 2012.)
14.Paragraph 3 gives the additional rule about the maximum allowance for expenditure incurred in straddling periods beginning on or after the relevant date of 1 (or 6) April 2012. For example, a company with such a straddling period might have a chargeable period that ran from 1 April 2012 to 31 March 2013. It would calculate its maximum AIA entitlement based on:
The company’s maximum AIA for its first straddling period would therefore be the total of (a) + (b) = £81,250.
15.Paragraph 3(2) provides that so far as expenditure is incurred in the part of the chargeable period falling before 1 January 2013, the maximum allowance is to be calculated as if the increase in the maximum AIA to £250,000 had not been made. In other words, for expenditure incurred before 1 January 2013, only expenditure up to the maximum amount of the £25,000 cap can be covered. Or, to look at this from another perspective, the company in our example would need to incur qualifying expenditure of between £56,250 [i.e. £81,250 - £25,000 = £56,250, if it had already spent the maximum of £25,000 in 2012] and £81,250 on or after 1 January 2013, if it wanted to benefit from the maximum AIA available to it for this first straddling period.
16.Paragraph (4) provides the transitional rules for chargeable periods that straddle 1 January 2015, when the maximum amount of the AIA is to return to its previous maximum of £25,000. This rule is identical in its operation to section 11(6) and (7) of Finance Act 2011, when the AIA was reduced from £100,000 to £25,000.
17.Paragraph 4(1) explains that the paragraph applies to a chargeable period that begins before 1 January 2015 and ends on or after that date. Such a period is referred to as "the second straddling period".
18.Paragraph 4(2) provides that the maximum allowance for the second straddling period is the sum of each maximum allowance that would be found if:
were treated as separate chargeable periods.
So a company with a financial year chargeable period, from 1 April 2014 to 31 March 2015, would calculate its maximum AIA entitlement for its ‘second straddling period’ based on:
The company’s maximum AIA for this straddling period would, therefore, be the sum of (a) + (b) = £193,750.
19.Paragraph 4(3) provides that, for expenditure incurred in the part of the chargeable period falling on or after 1 January 2015, the maximum allowance is the maximum calculated in accordance with (b) above, that is, £6,250 in our example. This rule does not affect the business's maximum AIA entitlement for the chargeable period as a whole (which is £193,750), simply the amount of expenditure incurred on or after 1 January 2015 that may be covered.
20.For example, if the company in our example at paragraph 18 above, incurred no qualifying expenditure in the period 1 April 2014 to 31 December 2014 and then spent, say, £30,000 in the period 1 January 2015 to 31 March 2015, the maximum AIA available to that company for expenditure in that particular part period would be limited to £6,250.
21.Paragraph 5 provides the rules explaining the operation of the AIA where businesses have to share a single AIA (where restrictions apply).
22.Paragraph 5(1) provides that paragraphs 1 to 4 also apply for the purposes of determining the maximum allowance in relation to businesses that are required by CAA to share a single AIA, in a case where one or more of those businesses has a chargeable period that straddles either the start or end date of the temporary increase. This provision is stated to be subject to sub-paragraphs (2) and (3).
23.Paragraphs 5(2) provides that, for the purposes of determining the maximum allowance in cases where businesses must share a single AIA, and one or more of the affected businesses has a straddling chargeable period, only chargeable periods of one year or less may be taken into account, and, if there is more than one such period, only that period which gives rise to the maximum allowance.
24.For example, four companies in a company group with different chargeable periods ending in the financial year 2012-2013 would be required to share a single AIA. In the following example, their individual maximum amounts are as shown in the third column of the table. However, their overall maximum, single AIA (to be shared amongst the group) would be the greatest maximum allowance, in this example, £93,750. So if, say, £93,750 were allocated to Company A, nothing further could be allocated to other companies in the group in this particular year. Alternatively, if, say, £43,750 were allocated to Company C, and the balance of the greatest maximum was to be allocated to Company D, no more than (£93,750 - £43,750)= £50,000 could be allocated to D in this particular year.
25.Paragraph 5(3) contains a special rule which relates only to businesses carrying on a trade, profession or vocation within the charge to income tax, as these businesses can have a chargeable period of up to (but no more than) 18 months. Limiting a business's chargeable period to a year ending at the same time as it actually ends, stops an increased AIA being shared with related businesses.
26.Paragraph 5(6) preserves the right of the business with the long chargeable period to see if it is entitled to look back to an earlier chargeable period to see if there is potentially an unused AIA entitlement in that earlier chargeable period.
27.Paragraphs 5(4) & (5) repeal section 11(11) of Finance Act 2011, but only in relation to cases where one or more of the chargeable periods, in which relevant AIA qualifying expenditure is incurred, is a chargeable period which straddles 1 January 2013.
28.Paragraph 5(6) provides that where an AIA has to be shared the special rules in relation to unincorporated businesses with chargeable periods longer than 12 months are not affected by the transitional provisions in paragraph 5.