Part 1: Principal rates etc. Section 8: Annual investment allowance Background note
Since April 2008 most businesses, regardless of size, have been able to claim the AIA on their expenditure on plant or machinery, except cars, up to a specified annual amount each year.
	Section 10 and Schedule 2 to the Finance Act 2014 extended the period of the temporary increase to 31 December 2015 and further increased the maximum amount of the AIA to £500,000 from April 2014.
	This temporary increase was designed to stimulate growth in the economy by providing an additional, time-limited incentive for businesses (particularly small and medium-sized businesses) to increase, or bring forward, their capital expenditure on plant or machinery.
	Following this temporary increase, the limit was set to fall back to £25,000 from 1 January 2016. However, at March Budget 2015, the government announced its commitment to set the limit at a much more generous rate.
	Companies, individuals and partnerships consisting only of individuals are able to claim the AIA in respect of their qualifying expenditure on both main and special rate plant and machinery. The AIA is effectively a 100% upfront allowance that applies to most qualifying expenditure up to an annual limit or cap (with expenditure on cars being the most notable exception). Where businesses spend more than the annual limit, any additional qualifying expenditure is dealt with in the normal capital allowances regime; entering either the main rate or the special rate pool, where it will attract writing-down allowances (WDAs) at the 18% or 8% rates respectively.
	There are restrictions for grouped companies; groups of companies under common control; related companies under common control; related activities under common control.
	The rules provide businesses with the freedom to allocate the AIA between different types of expenditure. For example, they may allocate it first against any expenditure on integral features, otherwise qualifying for the lower 8% special rate of WDA.