Supplementary memorandum submitted by
HM Treasury
Question 83 (Mr Philip Dunne): Enhanced capital
allowances
In Budget 2007, the Government announced a major
reform to the business tax system, including a reduction in the
main rate of corporation tax from 30 to 28% and reforms to the
capital allowances system to align more closely the rates of allowances
with the economic depreciation of assets.
As part of this package, the Government also
announced is was extending the enhanced capital allowances schemes
by introducing a payable credit for companies making losses, whereby
companies can surrender the losses attributable to expenditure
qualifying for enhanced capital allowances in return for a cash
payment.
Enhanced capital allowances, for environmentally
beneficial and energy-saving technologies, currently provide 100%
first year allowances for qualifying expenditure by companies
and unincorporated business. This allows a business to write off
all qualifying expenditure in the year in which it is made providing
a cash flow boost to businesses investing in these technologies.
On 17 December 2007, the Government published
"Payable enhanced capital allowances: technical note",
which includes draft legislation for the new payable element of
enhanced capital allowances.
"Business tax reform: capital allowance
changes—technical note" was also published on 17
December and confirmed that enhanced capital allowances would
be available in addition to the £50,000 annual investment
allowance introduced as part of the Budget 2007 reforms, which
provides 100% relief for the first £50,000 of expenditure
by all businesses.
It also highlighted the additional benefits
to the enhanced capital allowances scheme of the Government's
approach to the new classification of features integral to a building,
which will allow many businesses to claim enhanced capital allowances
on energy-efficient lighting systems where previously they could
not unless such systems were considered to be "trade specific"
These two documents in PDF format are available
on the Treasury's website to download at:
http://www.hm-treasury.gov.uk/consultations—and—legislation/businesstaxreform/consult—businesstax—reform.cfm
and
http://www.hm-treasury.gov.uk/consultations—and—legislation/capitalallowances/consul—capitalallowances.cfm
| 
