CAPITAL ALLOWANCES

Annual Investment Allowance

The maximum amount of the annual investment allowance will be increased to £500,000 from 1 April 2014 for corporation tax and 6 April 2014 for income tax to 31 December 2015, after which it will return to £25,000.

Enterprise Zones: Enhanced Capital Allowances

100% first-year allowances are available for companies chargeable to corporation tax which invest in unused (not second-hand) plant or machinery for use primarily in designated assisted areas within certain enterprise zones. The period in which they can qualify for the allowances will be extended to 31 March 2020.

Business Premises Renovation Allowance

Business Premises Renovation Allowance (BPRA) provides relief for businesses that incur capital expenditure on bringing back into business use qualifying business premises in disadvantaged areas which have been unused for over a year. These provisions clarify the definition of expenditure eligible for relief as that incurred on the actual direct costs of construction and building work and certain specified activities. Additional associated but unspecified activities may still qualify, but relief on these is limited to 5% of the expenditure incurred on the building works.

In addition:

  • BPRA cannot be claimed if another form of State aid has been or will be received;
  • the rule preventing expenditure incurred on buildings qualifying for relief before they have been unused for a year is clarified;
  • where expenditure is paid in advance and tax relief immediately claimed, the works to which that expenditure relates must be completed within 36 months or the relief will be withdrawn; and
  • the period in which balancing adjustments must be made if certain events occur will be reduced from 7 to 5 years.

These amendments have effect for income tax purposes, for expenditure incurred on or after 6 April 2014, and for corporation tax purposes, for expenditure incurred on or after 1 April 2014.

Mineral Extraction Allowances

New legislation will confirm that for the purposes of mineral extraction allowances, a mineral extraction trade consists of activity within the charge to UK tax. It will have effect on and after 1 April 2014 for businesses within the charge to corporation tax and 6 April 2014 for businesses within the charge to income tax.