Budget 2012 - Main points relating to Capital Allowances by Arthur Kemp




Capital allowances - abolition of Flat Conversion Allowances


As previously announced the abolition of flat conversion allowances will go ahead for expenditure from 1 April 2013 for corporation tax and 6 April 2013 for income tax payers.  Flat conversion allowances are 100% capital allowances for expenditure incurred in converting empty or underused space over shops and commercial premises for residential use. The abolition of flat conversion allowances will affect commercial landlords converting upper floors above shops into residential flats.


Capital allowances - business premises renovation allowance


The business premises renovation allowance (BPRA) is a 100% first year allowance available for expenditure on converting or renovating unused commercial properties in disadvantaged areas that have been vacant for 12 months or more, incurred in the five year period from 11 April 2007. As announced at Budget 2011, the BPRA scheme will be extended a further 5 years to April 2017.


Capital allowances - changes to allowances and thresholds for low emission cars


Affects any business that is making a car purchase from 1 April 2013 for corporation tax and 6 April 2013 for income tax payers.


Capital allowances - enhanced capital allowances for energy saving technologies


The tax credit available to loss-making companies investing in energy efficient plant and machinery will be extended for a further five years from April 2013.


Capital allowances - feed-in tariffs and renewable heat incentives


As previously announced, enhanced capital allowances are to be denied in cases where expenditure is incurred on plant and machinery that generates revenues from feed-in tariffs (FIT) or renewable heat incentives (RHI).  Also, expenditure on solar panels will come under special rate for capital allowances purposes. This change will affect businesses investing in assets used to generate income from FIT or RHI as well as solar panels from 1 April 2012 for corporation tax and 6 April 2012 for income tax payers except for the provision of combined heat and power systems which is 2014.


Capital allowances - first-year allowances for gas refuelling equipment


The Government announced in the Budget that it will extend the 100% first-year allowance (FYA) for plant and machinery used in gas, biogas and hydrogen refuelling stations for a further two years beyond the current expiry date, to 31 March 2015.


Capital allowances - fixtures


From April 2012, plant and machinery allowances on fixtures that have been subject to a claim by a previous owner will only be available to the purchaser where an election is made under CAA 2001 s198 to agree the value of fixtures.
Also, the rule to prevent plant and machinery allowances being claimed by a new owner in respect of assets previously subject to a claim for business premises renovation allowances (BPRA) has been amended to enable such switching of allowances to be made.


Capital allowances - plant and machinery anti-avoidance


Further to draft legislation published on 6 December 2011, the existing plant and machinery anti-avoidance provisions are to be tightened with effect from April 2012 where a first-year allowance (FYA) or annual investment allowance (AIA) can be denied and capital allowances can be restricted where there is a relevant transaction, defined as a sale of plant or machinery, a hire purchase or similar contract or the assignment of such a contract relating to plant or machinery.


Capital allowances - rate changes


As previously announced in Budget 2010, the rate of capital allowances for main pool plant and machinery expenditure will decrease from 20% to 18% and the rate for special rate pool will decrease from 10% to 8% both from April 2012.  Also, the Annual Investment Allowance (AIA) will reduce from £100,000 to £25,000.


Cap on unlimited income tax reliefs


The Government proposes a cap on income tax reliefs claimed by individuals.  The proposal may affect reliefs such as sideways trading loss relief where businesses generate losses which can be offset against other income.  The cap will be set at the greater of 25% of income, or £50,000 in any one tax year.  There will be a consultation period later this year but any changes will be effective from 6 April 2013.


If you have any questions about the impact this may have to you, please feel free to drop me a line.

Arthur Kemp acma
Managing Director


To ask Arthur a question - email: This email address is being protected from spambots. You need JavaScript enabled to view it. quoting Arthur Kemp

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