The turnover limit for small and medium sized enterprises (SMEs) is to be increased to £20 million as soon as the European rules allowing the increase come into effect. This change will mean that many more businesses will be able to claim enhanced capital allowances in the first year of acquisition of qualifying assets and have access to the enhanced allowances for information and communication technology related assets. The increase in size of the SME threshold will also mean those same businesses may be able to gain access to research and development tax credits.

100% First Year Allowances for ICT assets

The Chancellor confirmed that 100% First Year Allowances (i.e. the ability to write down the entire cost of an asset in the period of acquisition) will continue for another year in relation to Information and Communication Technology (ICT) related assets.

The Finance Bill also contains a measure to counter the abuse of 100% First Year Allowances available to small businesses in relation to ICT. The new rules prevent the availability of the 100% allowance if software, or right to use software, in respect of which the allowance is claimed is exploited by way of granting a right to use or otherwise exploit the software.

The changes will not affect small businesses investing in information and communications software or rights to use software bona fide for use in their own business.

Enhanced allowances for environmentally beneficial plant and machinery

Businesses investing in technologies which are environmentally beneficial will be able to immediately write off the cost of such equipment against profits of that period by way of a 100% first year allowance. The scheme will initially apply to plant and machinery which reduces water use and improve water quality, in particular meters and monitoring equipment, flow controllers, leakage detectors, efficient toilets and efficient taps.


A measure trailed before the Budget sees a wide-ranging anti-avoidance provision in relation to capital allowances on land and buildings introduced. This will withdraw capital allowances altogether in certain situations where an artificial scheme has been used to increase the size of a balancing allowance on disposal.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.