My right honourable friend the Financial Secretary to the Treasury (Jane Kennedy) has made the following Written Statement.

The Government announced a major package of reforms to the business tax system in Budget 2007. These reforms will enhance the international competitiveness of the UK by encouraging investment, promoting innovation and ensuring fairness across the tax system.

The package announced a reduction in the main rate of corporation tax to 28 per cent from 2008, making it the lowest in the G7 and below the OECD and EU15 average. It included reforms to deliver a simpler, two-rate system of capital allowances, to ensure that the tax system better reflects the economic depreciation of capital assets. The package also included the introduction of a new annual investment allowance of £50,000 for all businesses, to promote investment, particularly by smaller firms. This will allow 95 per cent of businesses to write off all of their investment, excluding expenditure on cars, in the year in which it is made.

In July, the Government published Business tax reform: capital allowances changes, a consultation on the Government's proposals for the key design features of the new annual investment allowance, new rules on integral building features and the transitional rules for the move to the new rates of capital allowances.

The Government are today publishing a technical note including draft legislation on these changes, reflecting the support of the majority of respondents to this consultation for the Government's proposals. As a result of the changes, the Government estimate that the administrative burden of the capital allowances system on business will be reduced by £15 million.

This technical note announces the Government's intention to extend the provision that allows capital allowances to be claimed on thermal insulation added to existing industrial buildings to all commercial buildings, at a rate of 10 per cent, in line with the Government's approach to environmentally beneficial features integral to buildings.

The Government also intend to withdraw the special industrial buildings allowances available in enterprise zones—EZAs—from April 2011, to coincide with the withdrawal of industrial buildings allowance. The Government consider that these allowances have now served their purpose, and that there is no case for retaining them. No business that has already claimed EZAs will be affected by this.

The publication of the draft legislation marks a significant milestone in the implementation of this major series of reforms, which will enable the UK's tax system to encourage businesses to invest for the future.

Copies of the technical note have been deposited in the Library of both Houses.