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Finance Act 2012

Background Note

40.The proposal to introduce Enterprise Zones was announced at Budget 2011. The main benefits for businesses in the new zones comprise simplified planning and business rates discounts.  The Budget statement also announced that the Government would work with Local Enterprise Partnerships (LEPs) to consider introducing enhanced capital allowances (in other words, first-year capital allowances (‘FYAs’) in Enterprise Zones in assisted areas.

41.In an HM Treasury Press Notice on 17 August 2011, the Government announced its decision to proceed with the enhanced capital allowances (that is, FYA) proposal.  On 26 August 2011, HM Treasury wrote to LEPs providing details of the proposed design of the new 100 per cent FYAs scheme, and seeking bids from the LEPs, based on that design. In addition, the letter outlined the criteria against which the bids would be judged.

42.The Government announced that it would make 100 per cent FYAs available in various designated assisted areas, within specific English enterprise zones in 2011, as well as in an additional zone in Humber, which was announced in February 2012.  At Budget 2012, the Government further announced that it would also make 100 per cent FYAs available in a designated assisted area of the London Royal Docks enterprise zone, in three Scottish enterprise zones (in Irvine, Nigg and Dundee) and in Deeside in Wales.  A full list of current zones and designated assisted areas delineated by maps will be published on the Treasury website in due course.

43.The standard rates of writing-down allowances for businesses’ qualifying  capital expenditure on plant or machinery are either 18 per cent or 8 per cent per annum (the rates that will apply from April 2012), depending on the nature of the asset.  100 per cent FYAs therefore provide business with a valuable tax-timing benefit.

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