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Minor changes to capital allowances this time


With the continued use of tax incentives to attract and stimulate growth in targeted sectors and geographic areas, it remains to be seen if those growth objectives are achieved.

6th Mar 2024
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With significant changes already being announced in the 2023 Autumn Statement relating to capital allowances, primarily in respect to full expensing and Investment Zones, there were relatively minor measures announced in today’s Spring Budget. 

Extending full expensing to leased assets

The Chancellor said that the government “will seek to extend full expensing to assets for leasing when fiscal conditions allow and will publish draft legislation shortly”. In the Autumn Statement, full expensing was introduced for expenditure incurred on items of main pool plant and machinery and a 50% rate for certain integral features in buildings. 

However, the measure did not extend to leased plant and machinery, apart from background plant and machinery in a building (in other words normal items found in many types of building and without which the building would not be useful generally). If introduced, the clarification will be welcome, particularly for landlords who currently have to determine what is background plant and machinery supplied under a lease and what is not, such as items to store or display goods.

The proposals may also be relevant for taxpayers who make tax losses and for non-taxpayers, such as public authorities. Currently, if a person who buys new plant and machinery does not have a tax bill to set the capital allowances off against, then effectively the tax relief given to the person who has bought the plant and machinery will be wasted. 

The new rules may permit non-taxpayers to lease plant and machinery on finance lease terms from taxpayer lessors, allowing the taxpayer lessor to set the tax relief off against its tax bill. This may contribute to a cheaper funding package for the non-taxpayer than would have been the case had it bought the plant and machinery outright. However, the devil is always in the detail and any draft legislation will need to be carefully scrutinised to see if this opportunity is available.

Additional Investment Zones

A further six Investment Zones were announced for Greater Manchester (above), Liverpool City Region, North East of England, South Yorkshire, and West Midlands and Tees Valley. The refocused Investment Zones programme, launched at the 2023 Spring Budget, gives areas a £160m envelope to catalyse local growth and investment. The six zones announced today come after the announcement of details for the West Yorkshire Investment Zone on 1 March 2024.

Each of the new zones will focus on different priorities for each local region, ranging from driving innovation and growth in advanced manufacturing, life sciences, electric vehicle manufacturing, clean energy and battery, to digital and sustainable construction technologies and the creative sectors.

Investment Zones will be extended from five to 10 years in Scotland and Wales, matching the extension announced for England in the Autumn Statement 2023. Full details of four Investment Zones in Scotland and Wales will be announced later this year. Details on the Northern Ireland Enhanced Investment Zone will be published soon.


Freeport tax relief extensions across England to 2031 were announced in the 2023 Autumn Statement. That 10-year window to claim tax reliefs has now also been agreed with the Scottish and Welsh governments meaning that they will now be available until September 2034 in Scottish Green Freeports and Welsh Freeports.

The Investment Opportunity Fund prospectus was an interesting further announcement. This sets out details of how the fund will support investment into Freeports and Investment Zones throughout the UK.

Stimulate growth

The continued use of tax incentives to attract and stimulate growth in targeted sectors and geographic areas is welcome. Taken as a whole, the UK is creating a suite of tax reliefs that would appear to be highly attractive to both inward investors and indigenous businesses and it will be interesting to monitor if those growth objectives are achieved over the life of the measures introduced.

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