Budget 2014 - Reaction

Chancellor George Osborne delivered his fifth Budget statement on Wednesday 19th March 2014 focusing on creating a “Resilient Economy”, further clamping down on tax abuse, and helping businesses and individuals invest to stimulate growth.

 E³ Consulting highlights here the key Property & Construction matters – we hope you find it useful (references relate to the Budget Red Book) – – see our fuller analysis in the attached PDF to the right. If you wish to discuss any specific measures please do contact us.

2.107 Capital allowances: Annual Investment Allowance (AIA)

  The government will increase the AIA to £500,000 for all qualifying investment in plant and machinery made on or after 1 April 2014 until 31 December 2015. (Finance Bill 2014) (12)

 These were widely expected measures and again will support investment by businesses into premises and other means of production.  As has been expressed by others, the constant ‘tinkering’ with these capped levels have been frustrating as the transition rules create complex mathematical requirements to properly assess the tax savings.  We would also prefer greater clarity to timeframes and feel a five year period should be considered a minimum time frame to allow business to properly respond to such tax incentives.  Timing issues remain important.

2.108 Capital allowances in Enterprise Zones 

 The government will extend the period in which enhanced capital allowances are available in Enterprise Zones by 3 years until 31 March 2020. (Finance Bill 2014)

 This extension to the EZ-ECAs will benefit those seeking to invest in the EZs, but one of the key issues with these measures is the lack of longevity as planning and funding any major development can take several years before a spade is put in the ground!  Clear tax relief over a 10 year period would enable businesses to properly respond with positive regeneration results for these EZs.

2.111 Business premises renovation allowance (BPRA)

 Following a review of BPRA, the government will make changes to simplify the scheme, make it more certain in its application and to reduce the risk of exploitation, with effect from April 2014. (Finance Bill 2014). 

These changes look to clarify what professional fees and associated costs are eligible or not, capping some aspects and also reducing the required ‘hold’ period before the tax ‘claw back’ kicks in from seven years to five.  As with some other measures a time window beyond the current April 2017 life cycle for BPRAs would be preferred as Government’s short time horizons don’t fully correlate with typical project timelines.

2.172 Enhanced Capital Allowances (ECA): Energy-saving and Water-efficient Technologies 

The list of designated energy-saving and water-efficient technologies qualifying for ECA will be updated during summer 2014, subject to state aid approval.  Adding two new Energy technologies – Active chilled beams and Desiccant air dryers with energy saving controls.  Twelve other Energy technologies will have adjustments to their criteria.  Water Technology relating to efficient washing machines is also being relaxed to widen the scope of eligible businesses. (42)

 These are the ‘normal’ annual adjustments and seem to be expanding the eligibility that will continue to support businesses benefit from these 100% capital allowances from improving the energy and water efficiency of their properties.  These become even more important as we approach the April 2018 deadline for property investors being prohibited from letting properties with EPC ratings of F or G.

2.188 Marketed tax avoidance schemes 

People using agressive tax avoidance schemes must make upfront payment of the tax in dispute whilst the matter is being considered by HMRC

Our detailed review is available from the side panel.