Enterprise Zones were reintroduced in 2012 to encourage economic growth and investment.
Businesses basing themselves on Enterprise Zones can access a number of benefits:
- Up to 100% business rate discount worth up to £275,000 per business over a 5 year period
- Simplified local authority planning
- Government support to ensure that superfast broadband is rolled out throughout the zone, and, if necessary, public funding
- 100% enhanced capital allowances (tax relief) to businesses making large investments in plant and machinery on 8 Zones in Assisted Areas
The Chancellor of the Exchequer announced at Budget 2014 that the deadlines for accessing business rate discounts and enhanced capital allowances on Enterprise Zones would be extended by 3 years. This means that businesses have until March 2018 to locate in an Enterprise Zone to be able to access business rate discounts. On sites where enhanced capital allowances are available, businesses now have until March 2020 to make their investment.
Old Style Enterprise Zones
The tax relief for the original Enterprise Zones created in the 1980’s were far more generous. For instance in Docklands, London, 100% allowances were available on all expenditure (excluding land). The new style only applies to plant and machinery. Property companies are denied the relief as they are carrying out a leasing trade (unless they occupy as their own HQ).
Capital Allowances and Enterprise Zones
Capital allowances allow businesses to write down the costs of qualifying plant and machinery assets against their taxable income. Any qualifying expenditure, not covered by a claim to the annual investment allowance (AIA) or an ECA, qualifies for writing-down allowances at either 18 per cent or 8 per cent a year depending on the nature of the asset. The Enterprise Zone legislation provides 100 per cent ECAs for expenditure incurred by companies on qualifying plant or machinery for use primarily in designated sites within Enterprise Zones, subject to certain conditions. The qualifying expenditure must be incurred between 1 April 2012 and 31 March 2020, and the area in which the plant or machinery is to be used must be an Assisted Area at the time that the expenditure is incurred.
The Enterprise zones which currently benefit from ECAs are:
There are certain restrictions to claiming Enterprise Zone benefits.
Unincorporated businesses, partnerships of companies and non UK resident companies are not eligible for special relief in Enterprise Zones.
Certain sectors are excluded:
- the fisheries and aquaculture sectors,
- the coal, steel, shipbuilding or synthetic fibres sectors
- the management of waste of undertakings
- the primary production of agricultural products.
For capital allowances, expenditure must:
- Comprise of investment on new and unused plant and machinery and not on replacement expenditure
- The assets must not be leased
- The expenditure must be incurred for the purpose of:
– a business of a kind not previously carried on by the company,
– expending a business carried on by the company, or
– starting up an activity relating to a fundamental change in a product or production process of, or service provided by, a business carried on by the company.
- Not be on a means of transport, or transport equipment for the purposes of a business in the road freight or air transport sectors
- Not be taken into account for the purposes of another State aid grant or relevant payment made towards that expenditure
- Not exceed a total of €125 million for the investment project.
Expansion of Enterprise Zones
In the 2015 Autumn Statement the Government announced 18 new Enterprise Zones and extended eight zones. These 26 new and extended Enterprise Zones will cover 3,226 hectares.
The new and extended Enterprise Zones are:
It is important to obtain specialist capital allowances advice at an early stage before opportunities are missed. Lovell Consulting can provide early advice as to whether expenditure qualifies for enterprise zone ECAs. Lovell Consulting have a highly skilled and expert team, dual qualified in surveying and tax. Therefore we have the expertise to identify unusual items of qualifying P&M, as well as allocating value to qualifying P&M items where no comprehensive construction information is available.