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News – 10.04.24

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Spring Budget 2020: Changes to capital allowances

A number of changes to capital allowances were announced at the Budget including an increase in the structures and buildings allowance rate, extension of allowances in enterprise zones to 2021, and extension of the zero emissions allowances to 2025.

The key changes are outlined below:

Structures and Buildings Allowance (SBA), which came in from 29 October 2018 will be increased from 2% to 3% per annum from 1 April 2020 (companies) and 6 April (individuals and partnerships). The increased allowance will be available from April 2020 on all qualifying spend from 29 October 2018 and not just new expenditure. The SBA asset life is consequently reduced from 50 to 33 1/3 years.
Enhanced plant and machinery 100% first year capital allowances for designated assisted areas in enterprise zones are retained until at least 31 March 2021.
The 2016 and 2017 Budget Zero Emissions 100% first year capital allowances on cars, goods vehicles and equipment for gas refuelling stations is extended from April 2021 to April 2025.

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Rhona Neil

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The key changes are outlined below:

Structures and Buildings Allowance (SBA), which came in from 29 October 2018 will be increased from 2% to 3% per annum from 1 April 2020 (companies) and 6 April (individuals and partnerships). The increased allowance will be available from April 2020 on all qualifying spend from 29 October 2018 and not just new expenditure. The SBA asset life is consequently reduced from 50 to 33 1/3 years.
Enhanced plant and machinery 100% first year capital allowances for designated assisted areas in enterprise zones are retained until at least 31 March 2021.
The 2016 and 2017 Budget Zero Emissions 100% first year capital allowances on cars, goods vehicles and equipment for gas refuelling stations is extended from April 2021 to April 2025.

But:

The temporary increase in the Annual Investment Allowance to £1 million per annum ceases from 31 December 2020 and reverts to £200,000 from 1 January 2021.

These measures are intended to encourage investment in plant and machinery, and especially in low and zero carbon technologies. The qualifying period for enhanced allowances is increased by four years, and is part of a policy objective to phase out the sale of new petrol, diesel and hybrid cars by 2040 (with consultation to bringing the date forward to 2035), helping the UK reach net zero emissions by 2050.

The structures and buildings allowances are intended to encourage new investment and growth in the commercial sector, and provide a replacement for the previous industrial buildings and hotel allowances, but with a wider scope.

What should you do?

Businesses need to ensure that qualifying Annual Investment Allowance can be brought in to account by 31 December 2020 and paid for by 30 April 2021 to qualify for the enhanced allowances.

Businesses are encouraged to explore the purchase of zero carbon vehicles and, where appropriate, to consider investment in enterprise zones.