Government announces 100% capital allowances in some enterprise zones

The zones qualifying for the enhanced tax relief are the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley.

The allowances will be available for plant and machinery investment incurred between April 2012 and March 2017, the Statement (98-page / 3MB PDF) said.

"Manufacturers thinking of locating in the areas selected for 100% capital allowances will welcome this announcement. However, unlike the old enterprise zone allowances of the 1980s and 1990s, 100% allowances are only available for expenditure on plant and machinery and not for the cost of the building itself", said Ian Hyde, a tax expert at Pinsent Masons, the law firm behind Out-Law.com.

"We have known since the March budget that new style enterprise zones were being created and that some of them might benefit from 100% capital allowances. It is only now that we know precisely which zones will qualify for the allowances." Hyde said. "As a timing point, any businesses located in one of these zones and planning expenditure in the short term may want to defer their expenditure until April to get the enhanced tax relief".

The creation of new enterprise zones was announced in the March 2011 Budget. The new zones will offer 100% business rates relief worth up to £275,000 over the first five years. They will also benefit from simplified planning restrictions and Government-supported superfast broadband.

The Chancellor announced in the 2011 budget that enterprise zones will be located in London and 10 specified local enterprise partnerships (LEPs) with each of those LEPs deciding precisely which part of their area will be included in their zone. The government also announced in the budget that it would take bids from a further 10 LEPs to designate part of their area as an Enterprise Zone.

It was announced in the budget that 100% capital allowances may be available for selected zones in areas where there is "a strong focus on high value manufacturing".

The autumn statement confirms that discussions are ongoing with Scotland, Wales and Northern Ireland regarding enhanced capital allowances in their enterprise zones.

The Chancellor also announced in the Autumn Statement that, subject to due diligence, the existing enterprise zone in the North East will be expanded to include land around the Port of Blyth and the Government will also consider an enterprise zone in Battersea linked to the redevelopment of the power station.

In addition it was confirmed that proposals from the Lancashire and Humber Local Enterprise Partnerships to form enterprise zones on and around the BAE Systems’ sites in these areas have also been approved.