In its response to HM Treasury’s policy paper on potential reforms to the UK’s capital allowances regime, the Institute’s Northern Ireland Tax Committee sets out the need for any reforms to have longevity in order to provide certainty for businesses when considering their future capital investment plans.
The Committee made the following key recommendations in its response:-
- The Government should fix the level of the annual investment allowance limit (which provides 100 percent relief for qualifying expenditure) at its current level of £1,000,000 until at least 2030;
- Any new First Year Allowance introduced should be in the form of a permanent additional relief at a rate higher than 100 percent;
- In reforming the UK capital allowances regime, the Government should avoid introducing temporary incentives for capital allowances and focus instead on longer-term incentives designed to drive consistent investment in capital which should also minimise, where possible, the complexity of the rules. The Government should consider how the capital allowances regime can be used to target specific types of investment behaviour;
- Full expensing should only be considered when the UK economy is on more stable ground;
- The Government should permanently re-introduce the 100 percent enhanced capital allowances regime, including the payable tax credit, for products on a refreshed and annually updated energy technology list; and
- The rate of writing down allowances for assets in the Special Rate Pool should be increased from 6 percent to 10 percent.