Budget 2016 – Business as usual for Capital Allowances

Yesterday’s budget was widely agreed to be a politically savvy one with eyes firmly on the upcoming EU referendum and smoke and mirrors to draw attention away from the downgraded growth forecasts.  However, in our little corner of the tax world, there was very little to say.  The only provision relating to capital allowances was to extend the ‘Enhanced’ Capital Allowances (ECA) in all Enterprise Zones to 8 years from the date of their designation. 

Expenditure incurred by business on qualifying plant & machinery in designated sites within these new Enterprise Zones is eligible for 100% ECA subject to entitling conditions.  When originally designated, ECAs were given for 5 years until March 2017 in some Zones and these were extended for a further 3 years until 2020.  The new provisions allow ALL Enterprise Zones to benefit from 8 years of ECA.  There were originally 24 Enterprise Zones across England, 8 of which were extended.  In 2015 a further 20 new Zones were announced.   The Government information page detailing the relevant Enterprise Zones can be found here.

Of course the general lowering of corporation tax rates over the next few years to 17% by 2020 is to be welcomed, although reform and restrictions to loss relief rules and caps on corporate interest relief for larger businesses will no doubt raise more than just eyebrows.