Recent news
On 6 December 2011, the Government published draft Finance Bill 2012 clauses and other tax updates;
Contaminated land
- Land remediation relief will now not be abolished.
Mandatory pooling of fixtures
- There will be no time limit on pooling expenditure incurred before April 2012. Claims continue to be possible at any time before sale of a property. For example, a building acquired in 2004 for £1m contains £0.2m qualifying plant and machinery. The building will be sold in December 2014 and the £0.2m allowances can therefore be included in the general pool at any time until December 2014.
- In relation to expenditure incurred from April 2012:
- Mandatory pooling: Mandatory requirement to pool expenditure at any time after acquisition but before sale rather than within a ‘short time’ after acquisition as originally proposed.
- Record of Agreement: Requirement for a joint tax election(CAA2001 s198) between the seller and new owner (or a tribunal determination where agreement cannot be reached) to fix the value of fixtures transferred must be made within 2 years of the sale.
- Prevention of 'artificial acceleration of allowances': There will be no requirement to fix the joint tax election at Tax Written Down Value ('TWDV') and the decision on the election value will be left to the parties to agree freely and commercially.
- Mandatory pooling: Mandatory requirement to pool expenditure at any time after acquisition but before sale rather than within a ‘short time’ after acquisition as originally proposed.
Business Premises Renovation Allowances (BPRA)
- This 100% allowance is available for renovating and converting empty commercial properties in certain disadvantaged areas.
- BPRA extended by 5 years to 31 March 2017 / 5 April 2017.
- For expenditure incurred on or after 11 April 2012, BPRA is limited to €20m per project.
- Where a property which has qualified for BPRA is sold and a balancing charge arises, the new owner is able to claim plant and machinery allowances on the residue of these fixtures.
Enterprise Zones
- The government confirmed the creation of Enterprise Zones for qualifying expenditure for 5 years from April 2012.
- 100% First Year Allowances ('FYA') for expenditure by trading companies on new, unused (and not second hand) plant and machinery for use in designated assisted areas within enterprise zones.
- Expenditure on assets for leasing is excluded.
- Applies to UK resident companies subject to UK corporation tax only which excludes partnerships with corporate members and individuals.
- Limit of €125m for each investment project.
- Must create new or expanded business, not replace existing assets. For example, the air-conditioning system is stripped out and a new system is installed. This expenditure will not qualify for 100% FYA, but instead will still qualify for Special rate plant and machinery allowances.
Feed-in tariffs (FIT) and Renewable Heat Incentives (RHI)
- Enhanced Capital Allowances will be denied where tariffs are actually paid in respect of electricity or heat generated under the FIT and the RHI schemes.
Office of Tax Simplification (OTS)
- As part of the OTS review, Flat Conversion Allowances and Safety at Sports Ground capital allowances are to be abolished from April 2013.
Anti Avoidance
- No changes were made to the application of the capital allowances anti-avoidance rules (CAA2001 s197) to prevent what HMRC termed 'artificial acceleration' of allowances. This means parties remain free to agree a value between £1 and the cost of the plant fixtures to include in a tax election under CAA2001 s198.
- Legislation to increase effectiveness of current anti-avoidance rules applicable to transactions where there is an 'avoidance purpose' intended to provide a 'tax advantage.'
Other issues
- The main rate of corporation tax will fall to 25% from April 2012.
- General Pool Plant writing down allowances will fall to 18% from April 2012.
- Special Rate Pool writing down allowances will fall to 8% from April 2012.
- Expenditure on solar panels will qualify as Special Rate expenditure from April 2012.
(References above to April 2012 or 2013 mean 1 April 2012 or 2013 for corporation tax and 6 April 2012 or 2013 for income tax, unless otherwise stated.)
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