As expected, 100% first year allowances will apply to expenditure by companies on plant and machinery to be used in certain designated areas within Enterprise Zones from 1 April 2012. As well as geographic restrictions on the availability of allowances, there will be exclusions for certain asset classes and certain industries.
Baker Tilly analysis
When the Chancellor announced the re-introduction of Enterprise Zones in Budget 2011, one of the measures announced to attract business to them was 100% first-year allowances on plant and machinery. In practice, the availability of the allowances will be very restricted. The allowances will only be available to companies, and only in certain designated areas within the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley Enterprise Zones. The intention is to concentrate the measure where there is a strong focus on manufacturing. EU State Aid rules dictate that the allowances will not be available to businesses ‘in difficulty’, or to those in certain industries, such as fisheries, coal, steel, shipbuilding, synthetic fibres or agricultural products.
In detail
100% first year allowances will be available for expenditure on plant and machinery by companies for use primarily in designated assisted areas within the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley Enterprise Zones. The intention is to concentrate the measure where there is a strong focus on manufacturing.
The 100% allowance will be available to companies only for expenditure incurred between 1 April 2012 and 31 March 2017, the expenditure must be incurred when the designated area is an ‘Assisted Area’, and must be used in that area. The 100% allowance will not be available on certain types of expenditure, including cars, ships and assets to be used for leasing.
The EU rules on State Aid mean that expenditure incurred by ‘Firms in Difficulty’ will be excluded, as will expenditure in certain types of business including fisheries, acquaculture, management of waste undertakings, coal, steel, shipbuilding, synthetic fibres or the primary production of agricultural products.
Further restrictions are that the expenditure must be on new investment assets (not on second-hand or replacement assets), and must not be on a means of transport, or transport equipment for a road freight or air transport business. There is also an upper limit of €125 million for any investment project.