Introduction »

A game of location?

Following the establishment of 24 new Enterprise Zones (EZ) in 2011 the Government has now announced that selected zones are to benefit from 100% First Year Allowances (FYA) on qualifying plant and machinery.

What’s to play for?

The advantages of being labelled an EZ designated area have so far been limited to a business rates discount package, and promised assistance with simplified planning and superfast broadband access. However, the Government also indicated that they might offer enhanced capital allowances in limited cases and proposals on this have now been made.

The proposals apply to expenditure on certain plant and machinery for use primarily in an EZ area specifically designated at the time the expenditure is incurred. 100% FYA means the ability to deduct capital expenditure in full for tax relief purposes. This may be attractive, given that in general businesses may only qualify for 100% relief on the first £25,000 of expenditure from April 2012 onwards.

The winners

There are 6 locations which have been selected for these proposals. They are the designated assisted areas within the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley Enterprise Zones.

Exclusions

Only companies within the charge to corporation tax will be able to qualify for these FYA. Care will also need to be taken as there are a number of exclusions. These are:

• certain companies ‘in difficulty’.
• selected industries are excluded such as agricultural production, fisheries, coal and steel.
• expenditure on transport and transport equipment for the freight and air transport sector are also to be excluded though not other qualifying expenditure for such undertakings.
• expenditure taken into account for another State aid grant/payment is also excluded.

Elite squad conditions

The other key conditions include the following:

• expenditure must be incurred in the five year period from 1 April 2012 to 31 March 2017 inclusive
• expenditure must relate to a new business, expansion of business or a new activity relating to a fundamental change of business product or service provided
• plant must be new, unused and cannot be replacement expenditure of existing plant.

If this is an area which interests you and you require further guidance on eligibility please do contact us.

Introduction »