Capital allowances to be reformed?
The super deduction and temporary increase in the annual investment allowance are both set to end in March 2023. The government is now asking for views on how the capital allowances system can be reformed and improved. What’s on the cards?
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Accounting for VAT if there is no cash payment
Your business has submitted repayment returns for the last two quarters and you are concerned that you might have underpaid output tax on some supplies where no money has changed hands. Are your concerns justified?
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Treatment of distributions under review
The government has launched a consultation on modernising the tax treatment of distributions and repayments of capital by companies. The proposals could affect the distinction between dividends taxed as income and capital payments subject to CGT. What changes are being considered?
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Tax relief on equipment you haven’t paid for (yet)
The timing of tax relief for purchases of equipment isn’t straightforward when payments are delayed or goods are purchased through hire purchase (HP) agreements. How can you use these rules to your advantage and get tax relief before you’ve paid the final invoice?
The government has launched a new call for evidence to gather views on capital allowances reform. If you want to respond, you should do so by 1 July. Any decisions are then likely to be announced at this year’s Autumn Budget. So, what are the suggestions being looked at? Here’s a brief summary:
- A permanent increase in the annual investment allowance.
- Increasing the rates of writing down allowances - the rates suggested in the policy paper are 20% and 8% for the main pool and special rate pool respectively.
- An additional first year allowance (FYA) to boost relief. For example, if a new machine is purchased for £10,000, the additional FYA could give tax relief of 20% (£2,000) in the first year. The full £10,000 would then be written down at the main rate over the life of the machine.
- Another option is to introduce full expensing of main rate plant and machinery and a 50% FYA for special rate plant and machinery. There would be no limit on the amount claimed each year.
If the last option is chosen, it would require a radical overhaul of the current system. But it would make little difference to smaller businesses, as they can usually claim 100% relief using the annual investment allowance anyway.
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