The Budget on 23 March 2011 announced a number of capital allowances changes effective from April 2011:
Short Life Assets (SLA)
Furnished Holiday Lettings (FHL)
- The disposal time limit on a SLA election will be extended from four to eight years.
- This only relates to assets qualifying as general pool plant and machinery.
Business Premises Renovation Allowances (BPRA)
- As previously announced, the use of loss relief from FHL will be restricted so it can only be set against income from the same FHL business.
- Additionally, the FHL business will be split into UK only and EEA only.
The Budget also announced a number of changes subject to future legislation
- The regime is extended by a further 5 years to April 2017
- This 100% allowance is available for renovating and converting empty commercial properties in certain disadvantaged areas.
Office of Tax Simplification (OTS)
- The government announced the creation of between 10 and 21 Enterprise Zones, including 1 in London.
- It will consider the scope for "introducing enhanced capital allowances to support zones in assisted areas where there is a strong focus on high value manufacturing".
Feed-in tariffs (FIT) and Renewable Heat Incentives (RHI)
- As part of the OTS review, Land Remediation Relief, Flat Conversion Allowances and Safety at Sports Ground capital allowances to potentially be abolished after 2012.
- Consultation on the appropriate capital allowances rate for expenditure incurred by businesses on generating equipment used for FIT and the RHI scheme.
Enhanced Capital Allowances
- Consultation in May 2011 on replacing the existing test for the application of the capital allowances anti-avoidance rules.
- Consultation in May 2011 on introducing a requirement that businesses pool their expenditure on fixtures within a short period after acquisition in order to qualify for capital allowances.
- As announced on 9 March 2011, the Government will introduce legislation to counter avoidance involving the leasing of plant or machinery where taxpayers claim capital allowances twice on one amount of expenditure.
- Qualifying technology list to be updated in Summer 2011 to include the addition of a new technology - energy efficient hand dryers. Also the qualifying criteria for automatic metering and targeting equipment will be simplified.
(References above to April 2011 or 2012 mean 1 April 2011 or 2012 for
corporation tax and 6 April 2011 or 2012 for income tax, unless otherwise
- The main rate of corporation tax will fall to 26% from 1 April 2011 (previously announced at 27%) with a further 1% drop annually until 2014/15 when the rate will be 23%
- The small profits rate of corporation tax will fall to 20% from 1 April 2011.
- IBA and HBA abolished from April 2011
- Confirmation that General Pool Plant writing down allowances will fall to 18% from April 2012.
- Confirmation that Special Rate Pool writing down allowances will fall to 8% from April 2012.