The recent, and temporary, increase in the AIA to £1m from 1 January 2019 creates computational issues if a trader's accounting period straddles this date.

The following example published by HMRC illustrates one variant that you may encounter when considering AIA relief due to clients.

Where a business has a chargeable period from 1 July 2018 to 30 June 2019, the maximum AIA for this period would be £600,000 calculated as follows:

a) the proportion of the period from 1 July 2018 to 31 December 2018, that is, 6/12 x £200,000 = £100,000 and

b) the proportion of the period from 1 January 2019 to 30 June 2019, that is 6/12 x £1,000,000 = £500,000

£100,000 + £500,000 = £600,000.

However, in relation to (a), the part period falling before 1 January 2019, no more than a maximum of £200,000 of the company’s actual expenditure in that particular part period would be covered by its transitional AIA entitlement (the maximum claimable before the increase on 1 January 2019).