BUDGET 2013
March 2013
The Chancellor’s budget of last month saw very few changes to the capital allowances rules which was a welcome respite to the raft of changes that we have become used to digesting at budget time.
Enhanced Allowances
The changes announced last month were simply some updates to the qualifying technologies within the enhanced capital allowances regime for energy-saving and water efficient assets. Several new sub-technologies have been added to the scheme, some have been removed and the qualifying criteria for over 20 technologies have been revised (see Table 1 below). Full details will be available on the www.etl.decc.gov.uk and wtl.defra.gov.uk websites.
Table 1: Changes to Qualifying Technologies for Enhanced Allowances
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Energy Saving Assets
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Water Efficient Assets
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New Sub-Technologies
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Carbon Dioxide (CO2) Heat Pumps For Water Heating
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Grey Water Reuse
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Removed Sub-Technologies
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Automatic Boiler Blowdown Control Equipment
Condensate Pumping Equipment
Switched Reluctance Drives
Automatic Air Purgers
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Efficient Membrane Filtration Systems
Wastewater Recovery And Re-Use
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Enhanced allowances for energy-saving technologies (ECAs) and the renewable heat incentive (RHI) have also been extended within Northern Ireland to ensure that plant and machinery in NI that qualifies for both RHI and ECA is treated the same way as similar plant and machinery located in the rest of the UK. This will be operable from 1 April 2013 (for corporation tax) and 6 April 2013 (for income tax) except for expenditure on combined heat and power schemes which will come into operation from either 1 or 5 April 2014.
Annual Investment Allowance
The rise in the 'Annual Investment Allowance (AIA)' available to businesses investing in qualifying plant and machinery kicked in on 1 January 2013. The AIA rose from £25,000 to £250,000 from 1 January 2013 for two years. This means that the first £250,000 of qualifying investment into machinery, business premises, expansion, etc in each year will be fully relievable against the businesses profits to reduce the amount of corporation or business tax payable. The move is designed to encourage and incentivise business investment, especially amongst small and medium sized firms.
The transitional rules that have been introduced to allow business to calculate the amount of AIA that they are due in this first period are very difficult to apply where an accounting period straddles the starting date or indeed starts before the previous change in the rate (April 2012). This is partly because of the changing level of AIA and also because of the seeming need for the Treasury to discourage any businesses to 'take advantage' of the new level of AIA. Extreme care should be taken when planning investment to benefit from the AIA during this initial straddling period.