AIA part 1

In this lesson

1. 0:00 Annual investment allowance explained
2. 1:37 Qualifying expenditure and asset categories
3. 2:10 Camilla's capital allowance calculation walkthrough
4. 5:01 Allocating assets to correct pools
5. 6:22 Capital allowances in tax adjusted profit
6. 8:02 Nate's short period calculation with proration

About this lesson

The AIA gives businesses 100% capital allowance on plant and machinery (excluding cars) up to £1 million per accounting period, allowing you to claim the full cost of qualifying assets in the year of purchase. You'll discover which assets qualify, how to allocate the allowance strategically, and how to handle special situations like private use assets and employee vehicles. The video walks you through the mechanics of the AIA with worked examples. You'll see how the £1 million limit is pro-rated for short accounting periods, how to decide which assets to claim the allowance against (it's your choice, not automatic), and why it's often best to allocate it to special rate pool assets first. The lesson covers qualifying expenditure including plant, machinery, lorries, vans and trucks, integral features, and private use assets, while clarifying that cars never qualify for AIA. Two detailed illustrations show how to apply this in practice. The first example demonstrates how to construct a capital allowance computation with multiple asset pools, including how to treat private use by the business owner separately. The second shows how pre-trading expenditure is treated and how to calculate tax adjusted trading profit by deducting your capital allowance claim from trading profit. This is essential knowledge for TX and ATX papers, where capital allowances questions are core exam content.

Duration: 10m