IR21

9 March 1999

ENCOURAGING INVESTMENT

FIRST YEAR ALLOWANCES CONTINUE FOR SMALL AND MEDIUM-SIZED BUSINESSES

As one of a range of Budget measures aimed at encouraging investment,
the Chancellor announced today an extension to the enhanced first
year capital allowances for small and medium sized businesses
investing in machinery or plant at the rate of 40 per cent for a
further year.

This measure will improve the cashflow of small and medium sized
businesses and help them to grow and invest. It is estimated that
they will pay #175 million less tax in the year 2000/01 and #150
million less tax in the year 2001/02.

These first year allowances, which are available to 99 per cent of
businesses, will now apply to expenditure incurred up to 1 July 2000.

DETAILS

1. Capital allowances are normally given on machinery or plant at 25
per cent of the cost remaining each year after deducting allowances
given in previous periods.

2. In the last Budget, a first year allowance at 40 per cent was
introduced for expenditure by small and medium sized businesses on
machinery or plant during the period from 2 July 1998 to 1 July 1999.
Today's Budget proposals extend this period to include expenditure
incurred during the year to 1 July 2000.

3. The rules both on which businesses qualify and on excluded
expenditure remain unchanged.

NOTES FOR EDITORS

1. Capital allowances allow the cost of capital assets to be written
off against taxable profits. They take the place of depreciation
charges in the commercial accounts, which is not allowable for tax.

2. First year allowances on machinery or plant are currently
available to small and medium-sized businesses at a rate of 40 per
cent for spending during the year ending 1 July 1999, (first
announced in Budget day press release 'Inland Revenue 10' on 17 March
1998). In the case of small and medium-sized businesses buying assets
for use primarily in Northern Ireland, the rate of first year
allowance is 100 per cent for spending during the period 12 May 1998
to 11 May 2002 (first announced in an Inland Revenue Press Release on
12 May 1998).

3. Extending the 40 per cent first year allowances to expenditure in
the year ending 1 July 2000 means that small and medium sized
businesses will pay an estimated #175 million less tax in the year
2000/01 and an estimated #150 million less tax in the year 2001/02.

INLAND REVENUE PRESS OFFICE
Media enquiries to: 0171 438 6692/6706/7327
(Out of hours: 0860 359544)

Non-media enquiries to:  0171 438 6420/6425
(Office hours only)

Inland Revenue information is on the Internet:
www.inlandrevenue.gov.uk

# = pounds sterling