Barely a year goes by without some change to the capital allowances regime keeping businesses on their toes in order to maximise tax relief on plant and machinery purchases. The upcoming Budget may usher further changes resulting in some more buy now or buy later decisions.
I am particularly interested to see if the Government put forward any alternative to the soon-to-be abolished Enhanced Capital Allowances (ECAs) to incentivise businesses to make energy efficient purchases. ECAs allowed companies to write off the total cost of purchases from the Government approved Energy Technology List in the year of acquisition (without eroding their AIA) as well as provide a mechanism to claim a 19% tax credit if loss-making.
Although it was an administrative burden for many, the scheme was well intentioned and effective in inducing loss-making companies to make environmentally friendly decisions. The Industrial Energy Transformative Fund (IETF) was announced as a pseudo-replacement aimed at intensive energy users, but despite a consultation that took place late last year, we are still unsure how the £315m fund will be used to benefit businesses.
Hopefully Rishi Sunak’s first Budget will provide some clarification on the IEFT, or an alternative green incentive/mechanism for claiming a tax credit under the capital allowances scheme to incentivise loss making businesses?
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