Introduction »

The location lottery

Enterprise Zones (EZs) are part of the Government’s plans to reduce burdens on the private sector to enable it to drive growth and job creation. Following the establishment of 24 new EZs in 2011, the Government has now announced that 6 selected zones are to benefit from 100% First Year Allowances (FYA) on qualifying plant and machinery.

Location winners

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

The prize

The proposals apply to expenditure on certain plant and machinery for use primarily in an area specifically designated at the time the expenditure is incurred. A 100% FYA means that capital expenditure can be deducted in full for tax relief in the period in which it is incurred. This facility will be in addition to other capital allowance reliefs already available to all businesses. However, there are no specific tax incentives for building expenditure as there was with the old EZs of the 1980s era.

As businesses generally will only have 100% relief on plant and machinery for the first £25,000 annually (excluding items which separately qualify as ‘energy saving type plant’) from April 2012, this may be attractive.

Companies only

Only companies within the charge to corporation tax will be able to qualify for these FYA. Certain companies ‘in difficulty’ or operating in certain industries, for example, agricultural production, fisheries, coal and steel, are excluded. Expenditure on transport and related equipment for the road freight and air transport sectors is also excluded as well as any expenditure taken into account for other State aid grants/payments.

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 a business or a new activity relating to a fundamental change of business product or service provided
• plant must be new, unused and cannot include replacement expenditure of existing plant.

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

Introduction »