Enterprise Zones (EZs) were introduced in the early 1980s to encourage regeneration of rundown areas across the UK. There were numerous sites designated as EZs during the 1980s and early 1990s with the major incentive being tax breaks available to those who invested in EZs within 20 years of the site being designated as such.
The last EZ was due to ‘expire’ in the next year or so, but when the coalition government came to power they decided to reintroduce the EZ concept and since 2010 have designated over 30 new EZ sites in England, Scotland and Wales.
The benefits afforded a business that is situated in one of these ‘new’ EZs is:
- Super fast broadband
- Business rates discount
- Simplified planning (through use of local development orders)
- Tax breaks – enhanced capital allowances
These are the tax equivalent of depreciation. In your surgery accounts there is a line in the profit and loss account for depreciation, which is meant to represent the erosion in value of the practice assets, such as equipment and fixture) over time. The write off policy (how many years for each asset class) is subjective and differs between practices.
When working out tax, HM Revenue and Customs (HMRC) tell us to ignore the depreciation line in the practice accounts and instead substitute it with a figure calculated in accordance with a very prescriptive set of their rules, known as capital allowances.
Until March 2012 the first £100,000 spend on capital equipment each year was subject to immediate tax relief in the year of purchase. Since April 2012 that limit has been reduced to £25,000; meaning that any yearly spend over £25,000 could take several years to obtain tax relief in full.
The ‘enhanced’ capital allowances rules that are available in some of the new EZs say that when you purchase capital equipment, regardless of how much it cost, the entire amount can be set off against tax in the year of purchase.
However bear in mind that of all the new EZs announced in the last couple of years, only six of them have been granted enhanced capital allowances status. For the remaining EZs, the ‘normal’ capital allowances rules apply, which means the new lower first year relief limit of £25,000.
If your practice is situated in an EZ, speak to your accountant to see if that EZ is one of the six that will also benefit from the enhanced capital allowances regime. If you are considering moving surgery premises, give some thought to the EZ benefits and see where the nearest ones are.
- Simon Gray is a partner with Henton & Co LLP specialist medical accountants www.hentons.com