As announced in the Spring Statement, HM Treasury has released a paper aiming to “kickstart a conversation with businesses” on proposed changes to the UK’s capital allowances regime.
It is expected that any changes would come into force from 1 April 2023, so the consultation is being carried out now to give ample time for the government to collect views ahead of its Budget later this year. The consultation will look at how businesses make investment decisions, and how important capital allowances considerations are when making those decisions, including the impact of the super-deduction.
Additionally, the government wishes to understand how the UK regime compares around the world, and the impact capital allowances have on the decisions of multinationals when deciding whether to invest in the UK.
Martyn Dobinson, a partner and a member of Saffery Champness’ Land & Rural Group says:
“Availability and extent of capital allowances can be a major influencing factor for rural businesses of all sizes in the purchase of farm machinery, plant, and other ‘big ticket’ items. This consultation is therefore as relevant to the agri-sector as it is to any other.”
Specifically, the government’s consultation includes consideration of:
- Increasing the permanent level of the Annual Investment Allowance (AIA).
- Increasing the rates of Writing Down Allowances (WDAs) for main and special rate assets from 18% and 6% to 20% and 8%, respectively.
- Introducing general first-year allowances (FYAs) for qualifying expenditure on plant and machinery.
- Introducing an additional FYA (ie an additional amount above the initial cost of the asset).
- Introducing permanent full expensing.
The government has said that it is looking at what more the capital allowances regime can do to support business investment. Responses to the consultation are requested by 1 July 2022.
More information on the consultation, visit Potential Reforms to UK’s Capital Allowance Regime.