'You could automate several of your bagging and packing lines and still have change’

How much will the 2016 AIA tax relief buy you?

By Dennis Allison

- Last updated on GMT

2016 AIA tax relief

Related tags: Finance

Since 2008, the HMRC annual investment allowance (AIA) has been revised four times and from January 1, 2016, will drop from an interim allowance of £500k to the highest permanent AIA ever of £200k.

‘When the Chancellor announced he was capping the AIA at £200,000 in his 2015 autumn statement, medium sized companies operating in manufacturing and agriculture, two sectors Pacepacker specialises in, breathed a sigh of relief.

£200,000 is a considerable boost to long term investment

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Dennis Allison

There had been speculation it would revert to £25,000, so settling on a year-on-year tax relief allowance of £200,000 is a considerable boost to long term investment.

So, if you decide to reduce your taxable profits by using this generous capital expenditure allowance, the big question is, how far will your money stretch?

The answer to this will always be application and customer driven, and there are so many options and routes you might go down. However, realistically you could automate several of your bagging and packing lines and still have change.

More importantly, any asset you buy will always add value to your business. As well as having a saleable value, investing in plant and equipment, especially automated packing solutions, increases your production efficiency and consequently you are increasing your profits even more.

Legitimate tax breaks to reinvest in your business’s long-term future

What’s more, by using the AIA, it’s not costing you anything upfront. Instead of paying £200k direct to the tax coffers, you will be using legitimate tax breaks to reinvest in your business’s long-term future.

Knowing there’s greater stability going forward with this tax break provides British agricultural packers with the green light to continue investing.

For any customer considering purchasing new packing equipment, our advice would always be they speak to their accountant or financial adviser so they can make an informed investment decision. It’s also advisable when holding these conversations to look into regional grants and incentives.

To help customers build up an accurate picture of equipment payback, Pacepacker has  developed a calculator tool which it is starting to introduce to customers.

Inputting data from the previous financial year, factoring in the number of shifts a facility runs, the number of operatives and agency staff employed, holidays and sick days taken by the workforce etc.,

Pacepacker can calculate the payback period based upon the specific project value and the types of robotic solutions that could be deployed.

Additional data, including the legal national minimum wages and the automatic workplace pension scheme arrangements are also included.'

Dennis Allison, is the managing director of Pacepacker Services, which designs and manufactures automatic packing systems including pick and place, sack placers, weighing machines, bagging systems, stitchers, heat sealers and robot palletising systems.

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