View more on these topics

Capital allowances

There was one Revenue Budget Note (number 3) specifically directed at capital allowances. Following last year&#39s introduction of 100% enhanced capital allowances for investments in energy-saving technologies, it was announced today that 100% enhanced (first year) allowances will also be available to all businesses on the following expenditure:

  • New low emission cars for use in their business or by their employees
  • Equipment (e.g storage tanks, compressors, pumps, gas connections and filling equipment) for refuelling vehicles with natural gas or hydrogen fuel
  • Spending on designated energy-saving technologies for leasing, letting or hire. The designated assets include low emission cars, natural gas/hydrogen refuelling equipment and the energy saving equipment within the scheme introduced last year.

    To qualify as a low-emission car for the 100% allowance, the car must be new, registered on or after 17 April 2002 and either emit not more than 120gm/km or be electrically propelled. The £12,000 capital allowance restriction, which otherwise applies to capital allowances for cars, does not apply to low emission cars.

    Apart from these proposals, no further changes have been announced on capital allowances. However, it is worth remembering that the enhanced 40% first year capital allowance, first announced in the 1997 Budget, has been made permanent for all small and medium sized businesses. It is estimated that more than 99 per cent of all businesses now qualify. The aim of the increased first year allowance is to help a business grow by investing in certain business assets and this relief will be of considerable interest and importance to directors of small private limited companies and, of course, the self-employed.

    The allowance is available in respect of expenditure by these businesses on machinery and plant, other than cars and certain other assets. The rate of capital allowances will be 40 per cent for allowances in the first year.

    The 40% rate applies to the first year for which allowances are due. For subsequent years, allowances will be due on the balance remaining at 25 per cent, or 6 per cent where, exceptionally, the long life asset rules apply, as before.

    The 40% rate applies to businesses which are small or medium-sized using the Companies Act definitions. These are broadly that a business satisfies two of the following conditions:-

    – turnover not more than £11.2 million,

    – assets not more than £5.6 million, and

    – not more than 250 employees

    or was small or medium-sized for the previous year.

    In the case of companies, the company must be small or medium-sized for the year in which the expenditure is incurred to qualify for the 40% rate. If the company is a member of a group, the group must be small or medium-sized.

    The 40% rate also applies to businesses carried on by individuals and partnerships made up of individuals provided the business would qualify if it were carried on by a company.

    Exclusions from the 40% rate
    The 40% rate does not apply to expenditure on machinery and plant for leasing, cars, sea-going ships and railway assets or to expenditure which is excluded from the rules on long life assets under the transitional rules (broadly long life assets bought on or after 26 November 1996 under a contract entered into before that date).


Survey will track consumers&#39 financial strategies

A new rolling survey tracking consumer attitudes towards pensions, wealth and other assets, based on a focus group of 13,000 people is to be run by leading thinktank Institute of Fiscal Studies.The survey, starting this month, is expected to reveal its first results in Q3 2003. It aims to track respondents until their deaths, following […]

Melville case implications

CHANGING THE IMPLICATIONS OF THE MELVILLE CASE In the Summer of 2001, the Court of Appeal held that the terms “property”, “interest” and “right” included a general power of appointment for inheritance tax (IHT) purposes. This meant that the use of a discretionary settlement reserving valuable rights for the settlor was confirmed as an effective […]

Mainland returns to running own PR firm

Financial Dynamics partner Neil Mainland has left the company after two years to set up his own firm, Mainland PR.Mainland, who joined FD after spending 10 years running his own PR firm, is in talks with a number of potential partners and is seeking clients in sectors, including fund management, life and pensions.He plans to […]

Paradise lost

My wife and I have been considering buying a holiday home but are unsure whether it is a sensible thing to do. What would your advice be about this and what are the alternatives? It is an ambition of many people to own their own home in paradise, where the sun always shines and the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm