Group capital allowances under review

Published: 29th February 2024

The annual investment allowance ( AIA) gives 100% tax relief on qualifying expenditure up to a specific limit (currently £1m), most commonly for plant and machinery. Group companies and those under common control all have to share a single AIA, to prevent abuse of the relief. Additionally, if there is a short or long accounting period, the AIA is apportioned accordingly. These considerations may be overlooked, meaning excess claims can occur, e.g. where two group companies both claim £1m.

If you receive a letter, it does not automatically mean that you have overclaimed. Such large scale campaigns are based on mass data mining, which is far from perfect but gives HMRC a reasonable base with which to identify potential errors. You should firstly check that the correct amount of AIA has been claimed for the accounting period(s) specified in the letter. If you discover a mistake, it should be corrected within 30 days of the date of the letter. However, if the AIA has been claimed correctly, it is still necessary to confirm this to HMRC using the contact details provided in the letter, otherwise an enquiry may be opened.