Give firms clarity on investment spending

George Osborne should use the Autumn Statement to give businesses greater certainty over their investment decisions, according to a leading business adviser.

Damian Walmsley, a partner at accountancy and business advisory firm Moore and Smalley, believes the chancellor should extend indefinitely an increase to the Annual Investment Allowance, which is due to fall back to £25,000 from the end of 2014.

The Annual Investment Allowance allows businesses to save significant amounts of tax on expenditure on plant and machinery.

Damian said: “If we are serious about sustaining the economic recovery, we have to encourage businesses that are going to invest in growth, expand their operations and create new jobs.

“Businesses will feel much more comfortable planning large capital investment projects if they know what the tax implications will be. Letting the AIA rate slip back from the current £250,000 to £25,000 would be a huge backward step and would send out the wrong message to businesses planning for growth.”

The chancellor increased the Annual Investment Allowance from £25,000 to £250,000 for a period of two years in last year’s Autumn Statement. This is due to revert back to £25,000 at the end of 2014. Damian added: “The fixed-term increase in the AIA was designed to boost growth by encouraging businesses to bring forward their investment decisions. However, as we move into 2014 and the recovery takes hold, many businesses will be planning investment over a two or three year period. The chancellor could put some of those investment decisions in doubt by failing to address the uncertainty over the AIA.”