By Daniel Hunter
As we approach the Autumn Statement announcement tomorrow, capital allowance consultants Stuart Rivers Associates is urging the chancellor to help businesses by using capital allowances more wisely.
Stuart Rivers Associates believes this is vital to promote renewed confidence in the economy — giving small to medium-sized enterprises (SMEs) the help they need to invest and grow.
“The Chancellor has a great opportunity to put right some of the things that previous governments have tinkered with in relation to the allowances businesses can claim when investing in capital items," the company’s managing partner Stuart Rivers explained.
“We would particularly like to see him increase the Annual Investment Allowance and help businesses further by introducing a scheme that benefits manufacturing companies wanting to grow wherever they are in the country — whether they are in an Enterprise Zone location or not.”
The firm would like to see the Annual Investment Allowance increase from £25,000 back to its previous level of £100,000 — or perhaps even for the Chancellor to increase it further still to £200,000. With the allowance as it stands, companies investing hundreds of thousands of pounds, and who are on the lowest band tax rate, would only receive a £5,000 reduction in their corporation tax bill which is hardly an incentive.
With regards to Enterprise Zones, they have found that these do not go far enough to help SMEs. They have a very narrow focus, being specific to small geographical areas and there is also confusion surrounding what the initiative offers with allowances varying from one Zone to another. For example, some include 100% relief for plant and machinery investment but others do not.
“We would like to see a more encompassing scheme being introduced to benefit those areas that that Enterprise Zones currently do not assist," Rivers adds.
"This could include a significant boost to Capital Allowances specifically for manufacturers which would go some way to replacing the now defunct Industrial Building Allowance. Interestingly, this was originally introduced after the Second World War to reinvigorate manufacturing but has recently been phased out.”
Finally, Stuart Rivers Associates hopes that the chancellor will be judicious and not make too many unnecessary new changes to Capital Allowances, as following the major changes made in April, businesses are still getting to grips with the transitional rules.
It is clear that the key to the recovery of the economy lies with the success of SMEs. Stuart Rivers concludes: “The Confederation of British Industry (CBI) has said that SMEs have the potential to inject between £20bn and £50bn into the economy by 2020 but this will only happen if they are given effective support.”
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