George Osborne has announced a temporary increase in the annual investment allowance for plant and machinery from £25,000 to £250,000.
Starting on 1 January and for the next two years, £250,000 worth of investment will qualify for 100% relief, the chancellor said. ‘This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs.’
The allowance, introduced in 2008, was reduced from £100,000 to £25,000 from April 2012.
Today’s announcement will be welcomed by many SMEs. As Tax Journal reported last week, leaders of 14 trade bodies wrote to The Sunday Times urging the government to increase capital allowances for investment in plant and machinery. Critics have pointed out that cuts in the main rate of corporation tax have not benefited smaller companies, some of which have been worse off as a result of recent changes to the capital allowances regime.
Chris Sanger, head of tax policy at Ernst & Young, said today’s announcement represented the fourth change in five years.
‘The last government introduced the allowance at £50,000, increasing it to £100,000 and it was cut by this government to £25,000 from April this year. Whilst such rapid changes could look incoherent, these incentives are clearly linked to the state of the economy and can accelerate investment,’ he said.
‘At a time of economic need, such yo-yo policy changes can nevertheless be rational. The chancellor will be hoping that entrepreneurs are listening to this element of his message and start planning on a spending spree in the New Year, rather than focusing on austerity.’
George Osborne has announced a temporary increase in the annual investment allowance for plant and machinery from £25,000 to £250,000.
Starting on 1 January and for the next two years, £250,000 worth of investment will qualify for 100% relief, the chancellor said. ‘This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain. It is a huge boost to all those who run a business, who aspire to grow and expand and create jobs.’
The allowance, introduced in 2008, was reduced from £100,000 to £25,000 from April 2012.
Today’s announcement will be welcomed by many SMEs. As Tax Journal reported last week, leaders of 14 trade bodies wrote to The Sunday Times urging the government to increase capital allowances for investment in plant and machinery. Critics have pointed out that cuts in the main rate of corporation tax have not benefited smaller companies, some of which have been worse off as a result of recent changes to the capital allowances regime.
Chris Sanger, head of tax policy at Ernst & Young, said today’s announcement represented the fourth change in five years.
‘The last government introduced the allowance at £50,000, increasing it to £100,000 and it was cut by this government to £25,000 from April this year. Whilst such rapid changes could look incoherent, these incentives are clearly linked to the state of the economy and can accelerate investment,’ he said.
‘At a time of economic need, such yo-yo policy changes can nevertheless be rational. The chancellor will be hoping that entrepreneurs are listening to this element of his message and start planning on a spending spree in the New Year, rather than focusing on austerity.’
