Government Review need for Capital Allowances!

Tax Digital

In 2017 The Chancellor of the Exchequer tasked the OTS (Office for Tax simplification) to review the need for Capital Allowances, and whether we should change to using Accounting depreciation when Simplifying tax relief for tangible fixed assets? Their report was published a couple of weeks ago.

Having sought consultation from a number of different stakeholders, the OTS concluded that:-

“If we were designing a system to give relief for capital expenditure of this kind from scratch, depreciation could work perfectly well and would make a lot of sense. However, our analysis has shown that the undoubted simplification benefits would not be worth the disruption of the wholesale upheaval involved. As only 30,000 businesses claim capital allowances in amounts exceeding the level of the Annual Investment Allowance, we consider that the focus should be on improving the existing system.”

In short, Capital Allowances are here to stay.

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