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U-turns

Capital allowances

  • Finance Bill 2011 – Treasury, 30 Mar 2011
  • Tenfold increase in 100% capital allowances in Autumn Statement – The Manufacturer, 5 Dec 2012

In the finance bill 2011, capital allowances were cut from £100,000 to £25,000.

Today, in the autumn statement 2012, capital allowances for plant and machinery increased ten-fold to £250,000, as The Manufacturer reports:

Manufacturers will breathe a collective sigh of relief after campaigning for higher capital allowances finally pays off in the autumn statement…

What are capital allowances? Companies deduct capital allowances from your taxable income, so they pay less tax with higher allowances. The higher the allowances, the less time it takes to write-off a large investment such as a new machine against tax.

From January 1, 2013 for two years, the Annual Investment Allowance for plant and machinery will increase tenfold from £25,000 to £250,000, which he [Osborne] said will bring 99% of all business investments in Britain in line for tax relief, encouraging them to reinvest their profits.

This u-turn on capital allowances for manufacturing, as the quote above shows, will be welcomed. Osborne used to call them “complex reliefs”; finally sees he was hurting investment.

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