Enterprise Zone Capital Allowances
5th February 2012
The Chancellor’s Autumn Statement added some flesh to the bones of information available on capital allowances in developments in the newly announced Enterprise Zones. Historically capital allowances in Enterprise Zones were available for all capital expenditure incurred on the development of commercial buildings in the Zone and were given effectively as a form of Industrial Buildings Allowance and essentially provided tax relief for all expenditure incurred in building a new facility. However the abolition of industrial buildings allowances relief in 2008 has created some problems and we now understand that for a limited number of Enterprise Zones in Assisted Areas only, 100% ‘first year allowances’ will be available for plant and machinery investment. Although for a typical office building, the qualifying percentage could be as much as 40% of the construction spend, this clearly is a far less generous relief to that which used to be available and will perhaps not be the incentive that it is trumpeted to be.
Furthermore, these first year allowances will be subject to a maximum cap of £125m Euros, and only UK registered companies will be eligible. It is also intended to be an incentive to investment and expansion rather than operating aid, which means only new or expanding businesses, or those undertaking fundamental diversification to their business will be eligible.
The Enterprise Zones that will currently attract this relief are Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley.