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Capital Allowances Incentives to Increase?

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

23 Mar 2022

Written by: David Gibson

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

02 Nov 2021

Written by: Nolan Masters

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

18 Oct 2021

Written by: David Gibson

Archive

 

Latest News

Capital Allowances Incentives to Increase?

23 Mar 2022

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

02 Nov 2021

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

18 Oct 2021

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

Veritas Supporting Charitable Causes

01 Oct 2021

We have chosen to support four charitable causes reflecting activities that are close to us and to people we know and would like to raise awareness of.

Using Artificial Intelligence for Capital Allowances

27 Sep 2021

Can Artificial Intelligence help claim capital allowances? In addition to preparing detailed claim reports for clients, Veritas Advisory, in partnership with Brunel University and Innovate UK, are applying technology to solve some of the issues, the main one being how to use data efficiently and correctly.

New Case Law – Potato Store is Plant

07 Aug 2021

JRO Griffiths Limited v The Commissioners for Her Majesty’s Revenue and Customs [2021] UKFTT 257 (TC) resulted in the taxpayer winning their appeal in whether or not a warehouse used to store potatoes for a crisp manufacturer is plant.  The taxpayer won on 2 counts.

Estates Gazette Article – Capitalise on Allowances

20 Jul 2021

Veritas Advisory Director Nolan Masters, together with Alex Barnes a Partner at BDB Pitmans LLP, have published an article in Estates Gazette on how capital allowances claims can mitigate the increasing cost of tax on property investment.

New Case Law – Satellites

16 Jul 2021

A Capital Allowances case Inmarsat Global Limited and The Commissioners for Her Majesty’s Revenue and Customs UT/2019/0167 V), has been refused by the Upper Tier Tribunal, in relation to the launch of satellites.

Taxation Magazine Article – The New Super Deduction

04 Jul 2021

In the June edition of Taxation Magazine Veritas Advisory Director Nolan Masters set out how the new super deduction and special rate allowances will affect property owners, occupiers and investors. Click here to read the article in full

In a surprise move, the Chancellor announced that businesses and investors would receive a timely cash boost by increasing the Annual Investment Allowance (AIA) from £200,000 to £1m.  Here we explain how businesses can make the most of this two year opportunity.

The AIA has been around for a number of years and the Chancellor for the government of the time has used it as a fiscal tool to incentivise the investment into certain business assets.  The value of the AIA has been as low as £25,000, in 2012, to now being announced it will increase from its current £200,000 level to £1m from 1 January 2019.

This should be seen as a great opportunity for businesses and investors to receive a significant amount of cash back on any planned capital investments over the next two years, after which the AIA is expected to return back to £200,000.

Businesses and investors are able to claim the AIA in respect of capital expenditure which qualifies for either general or ‘special rate’ plant and machinery (P&M).  It should be noted that the newly announced Structures and Buildings Allowance (SBA) can not be claimed under the AIA.  The AIA provides 100% tax relief as an upfront allowance for qualifying expenditure up to a specified annual limit.

For those chargeable periods which straddle 1 January 2019, there are transitional provisions which come into play, which will calculate the revised available AIA limit for each transitional period.

Example

A company with a 12 month chargeable period from 1 April 2018 to 31 March 2019 would calculate its maximum AIA entitlement based on:

(a) the proportion of the period from 1 April 2018 to 31 December 2018, that is, 9/12 x £200,000 = £150,000, and

(b) the proportion of the period from 1 January 2019 to 31 March 2019, that is 3/12 x £1,000,000 = £250,000.

The company’s maximum AIA for this transitional chargeable period would therefore be the total of (a) + (b) = £150,000 + £250,000 = £400,000, although in relation to (b) (the part period falling on or after 1 January 2019) no more than £250,000 of the company’s actual expenditure in that part period would be covered by its transitional AIA entitlement.

 

Where businesses or investors incur qualifying expenditure, which is greater than that annual limit, then they are able to claim tax relief at the normal Capital Allowance rates.

For those businesses or investors which are to embark on large expenditure projects over the next two years, careful consideration needs to be given, firstly in terms of the level of qualifying expenditure for normal P&M allowances and also at which point in time is the expenditure deemed to have been incurred, as this will dictate the level of the AIA limit to be applied.

Secondly, where the level of qualifying expenditure exceeds your AIA limit, a tax planning point is to allocate the qualifying expenditure which attracts the lowest rate of tax relief i.e. the special rate pool, in order to maximise the tax relief on the remaining P&M qualifying expenditure.

Often overlooked, is the fact that qualifying expenditure also includes the acquisition of second hand assets, which for AIA is deemed to be new expenditure and can be claimed against it.  With the purchaser now potentially gaining a faster rate of benefit than the seller, the way in which the benefit is negotiated may change for future deals.

Finally, given the increase to the AIA limit it should ensure that even for perceived smaller capital projects, it is now worth undertaking a detailed Capital Allowances exercise in order to identify qualifying expenditure to generate a tax cash saving by claiming it against the increased AIA.