Proposed Government Plan 2023-2026 (P.97/2022): thirteenth amendment Enhanced Capital Allowance

STATES OF JERSEY

PROPOSED GOVERNMENT PLAN 2023- 2026 (P.97/2022): THIRTEENTH AMENDMENT

ENHANCED CAPITAL ALLOWANCE

Lodged au Greffe on 28th November 2022

by Deputy S.G. Luce of Grouville and St. Martin Earliest date for debate: 13th December 2022

STATES GREFFE

2022  P.97 Amd.(13)

PROPOSED GOVERNMENT PLAN 2023-2026 (P.97/2022): THIRTEENTH AMENDMENT

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PAGE 2, PARAGRAPH (i) –

After the words "Appendix 3 to the Report" insert the words –

", except that, on page 33 of Appendix 3, after the words "relatively short period of time." a new section should be inserted as follows –

"Enhanced capital allowances

Currently businesses are able, under part 12A of the Income tax (Jersey) Law 1961, to claim capital allowances on qualifying capital expenditure to offset against allowable profits at a rate set at 25% per annum on a reducing balance basis.

From 1st January 2024 a new capital allowance will be introduced for small and  medium  sized  businesses,  allowing  them  to  offset  100%  of  capital expenditure for investment in the fiscal year that it is incurred."

Note:  After this amendment, the proposition would read as follows –

THE STATES are asked to decide whether they are of opinion

to receive the Government Plan 2023–2026 specified in Article 9(1)

of the Public Finances (Jersey) Law 2019 ("the Law") and specifically –

1. to approve the estimate of total States income to be paid into the Consolidated Fund in 2023 as set out in Appendix 2 – Summary Table 1 to the Report, which is inclusive of the proposed taxation and impôts duties changes outlined in the Government Plan, in line with Article 9(2)(a) of the Law;
2. to  approve  the  proposed  Changes  to  Approval  for financing/borrowing  for  2023,  as  shown  in  Appendix  2  – Summary Table 2 to the Report, which may be obtained by the Minister for Treasury and Resources, as and when required, in line  with  Article  9  (2)(c)  of  the Law,  of  up  to  those  revised approvals;
3. to approve the transfers from one States fund to another for 2023 of up to and including the amounts set in Appendix 2 – Summary Table 3 in line with Article 9(2)(b) of the Law;
4. to approve each major project that is to be started or continued in 2023 and the total cost of each such project and any amendments to the proposed total cost of a major project under a previously approved Government Plan, in line with Article 9(2)(d), (e) and

(f) of the Law and as set out in Appendix 2 - Summary Table 4 to the Report;

5. to  approve  the  proposed  amount  to  be  appropriated  from  the Consolidated Fund for 2023, for each Head of Expenditure, being gross  expenditure less estimated  income (if  any),  in  line  with Articles  9(2)(g),  10(1)  and  10(2)  of  the  Law,  and  set  out  in Appendix 2 – Summary Tables 5(i) and (ii) of the Report;
6. to approve the estimated income, being estimated gross income less expenditure, that each States trading operation will pay into its trading fund in 2023 in line with Article 9(2)(h) of the Law and set out in Appendix 2 – Summary Table 6 to the Report;
7. to approve the proposed amount to be appropriated from each States trading operation's trading fund for 2023 for each head of expenditure in line with Article 9(2)(i) of the Law and set out in Appendix 2 – Summary Table 7 to the Report;
8. to approve the estimated income and expenditure proposals for the Climate Emergency Fund for 2023 as set out in Appendix 2 – Summary Table 8 to the Report; and
9. to  approve,  in  accordance  with  Article  9(1)  of  the  Law,  the Government Plan 2023-2026, as set out at Appendix 3 to the Report, except that, on page 33 of Appendix 3, after the words "relatively short period of time." a new section should be inserted as follows –

"Enhanced capital allowances

Currently businesses are able, under part 12A of the Income tax (Jersey)  Law  1961,  to  claim  capital  allowances  on  qualifying capital expenditure to offset against allowable profits at a rate set at 25% per annum on a reducing balance basis.

From 1st January 2024 a new capital allowance will be introduced for small and medium sized businesses, allowing them to offset 100% of capital expenditure for investment in the fiscal year that it is incurred.".

Page - 3

P.97/2022 Amd.(13)

REPORT

Currently businesses (regardless of their legal structure) are able, under our Income Tax rules, to claim capital allowances on qualifying capital expenditure to offset against allowable profits at a rate currently set at 25% per annum on a reducing balance basis.

This amendment will encourage and stimulate investment, not just in reducing our carbon footprint by replacing old and inefficient plant, but across the economy as a whole,  by  enhancing  the  capital  allowances  available  to  small  and  medium-sized businesses (SME's) from the current 25% per annum on a reducing balance basis to 100% in the fiscal year that the qualifying capital investment is made.

There would be no reduction in the tax received overall from this measure merely a different cash flow profile of tax collected.

Such an enhancement to the rules for capital allowances should incentivise businesses to invest in improving productivity and in strengthening their asset base.

Financial and manpower implications

There are no financial and manpower implications associated with this amendment.