As announced as part of the Autumn Statement, the government has published a technical consultation on changes to the capital allowances system, with the aim of simplifying the tax system.
The introduction of permanent Full Expensing provides an opportunity to revisit the wider Capital Allowances regime and simplify it where possible.
The principles and focus of the consultation will be:
- On simplifying, condensing or reducing some of the existing wider Capital Allowances legislation.
- Looking at Plant & Machinery (P&M) only, not Structures & Buildings Allowances or Research & Development Allowances.
- Not on changing rates of allowances or the scope of specific allowances.
- Looking at the smaller changes that can be made to Capital Allowances Act 2001, not substantive reform.
Writing Down Allowances (WDAs) will continue to be maintained as:
- It is required for historic expenditure.
- P&M only qualifying for 50% First Year Allowances will require ongoing WDAs once added back to the pool.
- It is not always suitable for a business to claim Full Expensing.
The consultation will take place through stakeholder and industry engagement by way of working groups, with the outcomes being used to advise ministers on the next steps.
Useful guides on this topic
Full expensing & First Year Allowances
What is full expensing? When does it apply and what is the rate of allowance? How are disposals of full expensing assets dealt with? What assets qualify for the 50% First Year Allowance (FYA)? How do I deal with disposals of 50% FYA assets? How do I make a claim?
Capital allowances: Rates and allowances
What different types of capital allowances are available? What are the current and past rates of allowances?