The Annual Investment Allowance (AIA) was introduced in the Finance Bill 2008 to encourage investment by small businesses in items of plant and machinery.
Prior to April 2008, when you purchased any item such as a van, it was capitalised in the accounts. For tax purposes, you were entitled to claim a first year allowance of 50% of the cost in the period that the item was acquired, and then a percentage of the cost each year thereafter.
From 1st April 2008 for companies, and 6th April 2008 for soletraders and partnerships, the AIA allows business to claim 100% capital allowances on the cost of the first £50,000 of business expenditure acquired in that accounting period. It effectively allows you to write off the cost of the first £50,000 you spend on most plant and machinery after April 2008, in full against your profits for tax purposes.
You should note that there special rules where your accounting period straddles April 2008, as the annual investment allowance must be reduced proportionately. We would urge you to speak with your local TaxAssist Accountant before acquiring any new plant and machinery, as they can advise on the tax relief that is applicable on the purchase.