Enterprise Zones and Enhanced Capital Allowances (ECAs)

As part of his 2011 Autumn Statement, the Chancellor announced that enhanced capital allowances will be made available to companies in a limited number of Enterprise Zones. If your business is set up in:
• The Black Country
• Humber
• Liverpool
• North East
• Sheffield and
• Tees Valley Enterprise Zones

You may be eligible to claim a 100% first year allowance (FYA) on qualifying expenditure on new plant and machinery purchased between 1 April 2012 and 31 March 2017.

Draft legislation issued on 6 December 2011 sets out further details on these FYAs, which contain several restrictions on their availability.

To be considered for ECAs the plant and machinery should be used for:
• the purposes of a business "of a kind not previously carried on by the company", or
• for the purpose of expanding a business already carried on by the company, or
• for starting up an activity that relates to "fundamental change" in a product, production process, or service of the company.
• Additionally, the machinery cannot be a replacement asset.

While these rules are clearly designed to ensure that the investment will genuinely encourage growth within the company, they are particularly restrictive and could prevent many businesses from qualifying for the FYA. It is hard to imagine a struggling business deciding to invest in a completely new area, yet these are the very businesses most in need of Government help.

If you are based in one of the six qualifying areas, clearly this is an allowance that you will want to claim.

If you would like guidance on these issues please call freephone 0808 144 5575 or email our Tax team: tax@armstrongwatson.co.uk

Disclaimer – Please note: The ideas shared with you in this article are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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