HMRC is currently scrutinising companies’ claims on annual investment allowance (AIA), which is subject to an annual limit of £1,000,000 from 2019. AIA is a form of capital allowance that provides relief to businesses on their plant and machinery investments up to the maximum annual amount. The maximum amount may differ according to the company’s length of accounting year, whether shorter or longer.
The UK government is distributing new sets of prompt letters to companies for this matter, aiming to better educate them on their tax obligations and incite necessary actions. In the letter, HMRC highlights that a group of companies or related firms controlled by the same person will have a shared AIA threshold.
Potential errors in the company returns abound in groups or related companies that file returns individually, as they may have already exceeded the annual limit without being aware. Companies will have to review their returns and make the necessary amendments.
Companies found to have made errors in their returns must reach their tax accountants right away, as they are only given 30 days from the date of receiving HMRC’s letter to make amendments. They may have to pay interest on late payments and/or receive refunds from HMRC with interest, if any, in case of overpayment.
Those who believe they do not exceed the threshold may still have to review their returns, provide HMRC with evidence, and opt out of further obligations. For the non-compliant, HMRC may take further actions, which is usually in the form of an in-depth compliance check.
To ensure full compliance with the latest prompt letter, Legend Financial is here to help. Our tax advisers have been serving all kinds of businesses since 2011 for their taxation needs. For more tax and business news, subscribe to our monthly newsletter now! We also invite you to consult with our advisers today for more accurate compliance with HMRC.
References
HMRC prompts companies to review AIA claims. Retrieved from ICAEW: https://www.icaew.com/insights/tax-news/2024/feb-2024/hmrc-prompts-companies-to-review-aia-claims
Claim capital allowances. Retrieved from Gov.UK: https://www.gov.uk/capital-allowances/annual-investment-allowance
