Loss-making companies will be able to surrender to HMRC tax losses related to expenditure on certain environmentally beneficial equipment and receive in return each year a payment of 19% of the losses surrendered. This payment will be capped at the higher of:

1. £250,000.

2. The company's total PAYE and Class 1 NICs liability for the year.

This is the effect of draft legislation contained in a technical note published on 17 December 2007 by HM Treasury and HMRC called "Payable enhanced capital allowances". The draft legislation will be included in the Finance Bill 2008 and will apply to expenditure incurred from 1 April 2008.

This measure may be attractive to loss-making groups which derive little or no current tax benefit from the 100% first year allowances available for this type of expenditure. The new rules will contain clawback provisions, which will apply if the relevant equipment is sold within four years and which may require companies to repay to HMRC part or all of any payment received.