Simon Parker, Finance Director of Merlin Business Software, provides his insight to companies considering investing in IT but who may have forgotten about the significant reduction in the Annual Investment Allowance which is only a few weeks away! From a financial point of view, it might make sense to place an order by March 2012 for a new Business System! Several years ago, the Government introduced the Annual Investment Allowance (AIA) which is, as you may know, a capital allowance against Corporation Tax available to many businesses for the purchase of assets including computer hardware and software. Relief is given on the full cost of assets up to a maximum annual figure. This maximum is currently £100,000. For a business with a year-end in June 2011, which was categorised for tax purposes as small or medium-sized, qualifying IT expenditure could help to make a Corporation Tax cash saving in excess of £21,000. However, the AIA threshold is to be reduced to £25,000 from 1st April 2012. For the same business, their accounting period would straddle the 1st April and the AIA would be apportioned on a time-related basis. Thus for the period to June 2012, they would be eligible for a reduced allowance of £81,250 being (£100,000 x 75% and £25,000 x 25%). The timing of IT purchases may be very significant for lots of businesses over the next few months and, after taking independent professional tax advice, it may make sense to accelerate expenditure before the full reduction in allowances comes into effect. A further piece of help during the recent economic downturn, has been the continuing low-level of bank base rate. Despite the fact that financial institutions are charging relatively high margins, three and five year leasing arrangements are available to many businesses at rates below those around two or three years ago. Current and future customers may have access to certain facilities but the Chatsworth sales team has well-established contacts with funders specialising in all forms of IT finance.