Act quickly to take advantage of tax relief

“Generally, the expenditure is deemed incurred when the obligation to pay becomes unconditional – usually on delivery. There are, however, exclusions to this rule which should be discussed with your professional adviser,” he added.

Paul Jennings, managing director of JCB Finance, said: “While the AIA is due to revert to £200,000 on January 1 2021, businesses whose year-end is not December 31 could see their AIA allowance drop even lower, in some cases to as little as £50,000 if they do not time their purchases right.

“The temporary increase to £1 million is only available for qualifying expenditure incurred in 2019 and 2020. If companies have a December 31 year end, then the position is straightforward, as a December 31 year end will coincide exactly with the decrease in the limit. Put simply, firms would receive £1 million potential relief in 2020 and £200,000 potential relief in 2021.”

The maximum allowance for a farm with an accounting period of April 1, 2020, to March 31, 2021, will be £800,681 because it can only claim three quarters of the £1 million allowance in 2020 (April 1 to December 31) and one quarter of the £200,000 allowance in 2021 (January 1 to March 31).