HM Treasury has published a policy paper 'Potential Reforms to UK’s Capital Allowance Regime – Inviting views'. Following the 2022 Spring Statement, which set out illustrations of the types of changes Government could make to the current capital allowances regime, this new publication invites interested parties to provide their views on such reform.

Options for modifying the current capital allowance regime are being considered by the Government ahead of the 2022 budget and before the Super-deduction comes to an end in April 2023.

Responses to this policy paper are invited from:

  • Businesses of all sizes.
  • Accountants, tax advisers and legal representatives.
  • Trade associations and representative bodies.
  • Think tanks and research institutions.

Spring Statement options

Various options for reform were set out in Spring Statement 2022 as to how the current capital allowances regime could be changed. Suggestions, on which views are now invited, included:

  • Increasing the permanent level of the Annual Investment Allowance (AIA) from £200,000.
    • For example, to £500,000.
  • Increasing the rates of writing down allowances from 18% and 6%.
    • For example, to 20% and 8%.
  • Introducing general First Year Allowances (FYAs) for qualifying expenditure on plant and machinery.
    • For example, a 40% FYA for expenditure on main rate and a 13% FYA for expenditure on special rate plant and machinery.
  • Introducing an Additional FYA.
    • For example, at 20%.
  • Introducing full expensing of main rate plant and machinery and a 50% FYA for special rate plant and machinery.

There are three further areas of interest identified on which views are also sought:

Investment decisions

  • How firms make investment decisions, the relative importance of capital allowances in those decisions, and how they are taken into account.

Super-deduction

  • How the Super-deduction has affected the investment decisions of businesses.

Current system of capital allowances

  • How far Capital allowances rates influence decisions by multinationals on which territory to invest in.
  • Levels of awareness of the current system and how simple it is to understand and operate, and whether it provides adequate support for business investment.

Written responses can be made online until 5pm on 1 July 2022.

Useful guides on this topic

Capital Allowances: What's new 2022-23
What's new in Capital Allowances for 2022 and 2023? A summary of the different types of capital allowances currently available to UK businesses.

Plant & machinery (self-employed): Allowances
A person who is engaged in qualifying activities is able to claim plant and machinery allowances when they incur qualifying expenditure.

Super-deduction & First Year Allowances
What is the new Super-deduction allowance? When does it apply and what is the rate of allowance? What other First Year Allowances (FYAs) are available? What is the SR Allowance? What if I dispose of an asset on which the Super-deduction or SR allowance has been claimed?

What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building? 

Vehicles (4 wheels): Allowances
What capital allowances are available for vehicles? How does HMRC classify what is a car or what is a van? 

External links

HM Treasury Policy Paper: Potential Reforms to UK’s Capital Allowance Regime – Inviting views


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