Business Tax
Capital allowances
Important changes to capital allowances, announced last year, come into effect in April 2012. The rates of writing down allowances will be reduced for chargeable periods ending on or after 1 April 2012 (companies) or 6 April 2012 (unincorporated trades). The ‘general pool’ will be written down at 18% rather than 20%, and the ‘special rate pool’ (typically plant integral to buildings and cars with CO2 emissions ratings above 160g/km) at 8% rather than 10%.
The AIA – the amount of expenditure on plant and machinery that qualifies for a 100% immediate deduction – will be reduced from £100,000 to £25,000 for expenditure from 1 April/6 April 2012 onwards.
There are transitional rules for computing both the WDA and the AIA for chargeable periods which straddle the change in rate.
Future changes on cars
The Chancellor announced that there would be ‘extension and tightening’ of the enhanced capital allowances for low-emission cars.Those with ratings up to 110g/km currently qualify for 100% FYA.This was planned to end in April 2013; it will now be extended to 31 March 2015 but restricted to cars with ratings up to 95g/km.
At the same time, businesses buying cars with ratings above 130g/km will only qualify for the reduced WDA of 8%. At present, cars with ratings up to 160g/km are put into the ‘general pool’ with the higher rate of WDA (20% in 2011/12, 18% in 2012/13).
| Tax Trap |
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| Watch out for the fall in capital allowances on cars |
Enhanced capital allowances
Certain types of environmentally-friendly plant and equipment qualify for 100% first year allowances. The Budget has announced the addition of heat pump driven air curtains to the qualifying categories, and some of the other categories will be removed or revised.
Personal service companies
The Government has announced yet another review of the so-called ‘IR35’ rules that impose tax and NIC charges on ‘disguised employment’. Some recent high profile cases of avoidance using such companies have drawn the attention of ministers to the issue. The measure has not raised nearly as much money as was expected when it was introduced, but has led to many arguments between taxpayers and HMRC. A consultation exercise will consider how to strengthen the rules and also simplify their operation.
Enterprise Zones
The government has announced the creation of more enterprise zones. Businesses in EZs enjoy several advantages, including:
- 100% discount on rates
- Enhanced capital allowances (these may be introduced where a case is made to support ‘high value manufacturing’, and have been confirmed for at least three Enterprise Areas in Scotland)
- Relaxed planning regulations