HM Treasury is inviting businesses to share their thoughts on how the UK’s capital allowances regime could be reformed, in the hope of fostering a new culture of enterprise and growth in the UK.
The UK has a long-standing issue with productivity, and one of the key underlying causes is a lack of capital investment. According to OECD data, companies invest just 10% of GDP each year, compared with 14% in our competitor countries – and one of the reasons is that our tax system doesn’t reward investment as much as other countries do.
The Spring Statement set out some illustrations of the types of changes government could make to the current capital allowances regime including:
- increasing the permanent level of the Annual Investment Allowance
- increasing the rates of Writing Down Allowances
- introducing general First-Year Allowances (FYAs) for qualifying expenditure on plant and machinery
- introducing an additional FYA
- introducing permanent full expensing
While some business organisations have called for full expensing to be introduced following the super-deduction, this could cost over £11 billion a year. The government is keen to hear views as to whether that would be well targeted if funding is available, and if it isn’t available, how to best target their approach.
Businesses have until 1st July 2022 to share their thoughts via this link: Reform UK Capital Allowance Regime – GOV.UK
If you have further questions or would like support with capital allowances, please contact your accountant.
