ACCA ATX ^UK Syllabus A1. Income tax - Related companies - Annual Investment Allowance - Notes ^{2 / 2}

The AIA must be split between related companies.

Companies owned by the same individual will be regarded as related where they are:

a) Engaged in the same activities or
b) Share the same premises

This could be the case if an individual runs two companies from home, the AIA will be split between the two companies. 

In such circumstances, the owner of the companies can choose how to share the single AIA between them.

• Unrelated companies owned by the same individual will be entitled to their own AIAs so long as they do not share the same premises and are engaged in different activities.

Groups of companies

Only one AIA is available to a group of companies. 

Note that

- A group for this purposes is where the parent company holds a majority shareholding in the subsidiary. 

When allocating the AIA

- The group members can allocate a maximum of £1,000,000 across the group in any way wanted. 
- The AIA does not need to be divided equally between the companies
- All of the allowance can be given to one company, or any amount can be given to any number of companies within the group.

Illustration

Jane owns Jake Ltd. 

Jane also wants to know whether she should purchase Jill Ltd. (Jake Ltd. will then purchase all of the components from Jill Ltd.)

Which arrangement will result in the AIA being shared?

• Solution

  If Jake Ltd. purchases Jill Ltd. directly, then Jake Ltd. will own 100% of the share capital of Jill Ltd. and there will be one AIA for the group.

  If Jane purchases Jill Ltd. and:

  1) Jake Ltd. and Jill Ltd. are run from the same premises or, 
  2) Jake Ltd. and Jill Ltd. are engaged in the same activities,

  Then, Jake Ltd. and Jill Ltd. will share one AIA – otherwise they will not.