SMEs – First-year investment in doubt

The government has refused to guarantee the continuation of enhanced first-year capital investment allowances for small and medium-sized businesses, write our parliamentary staff.

Financial secretary Barbara Roche warned: ‘It would be premature to decide now whether first-year allowances should be extended again next year or during the two subsequent years.

‘We shall need to examine the matter very carefully in the light of the economy and all the other measures that we have introduced, or are introducing, to help small businesses.’

Roche rejected a Tory amendment to the Finance Bill moved by accountant MP and shadow chief secretary David Heathcoat-Amory, continuing 40% first-year allowances until 2004.

Heathcoat-Amory claimed firms had been ‘penalised’ by bringing forward investment they would not have otherwise undertaken because they believed the concession would end, as was announced in the past three Budgets.

Heathcoat-Amory called on Roche to explain the government’s investment strategy ‘and say whether this really will be the end of annual extensions or whether businesses will, in due course, find they have been betrayed yet again and need not have brought forward their investment plans to benefit from the lighter tax incentive’.

Liberal Democrat spokesman Edward Davey said businesses would not welcome short-term measures. He urged ministers to decide whether to introduce measures to encourage investment, or make the new allowances permanent.

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