The increasing complexity of the Capital Allowances legislation, differing allowances available specific to building uses or certain taxpayers, the introduction of Structure and Buildings Allowances, the timing restrictions on allowances qualifying for 130%, 100% or 50% and the various rules on disposal have created layers of difficulty in calculating and maximising capital allowances tax relief.
The ‘complexity’ issue results in tax incentives being both under and overclaimed, incorrectly categorised or not being claimed at all!
One way to part overcome this is the use of artificial intelligence. 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.
Put simply, capital allowances is a process of coding expenditure to the correct category, interpreting the relevant legislation at date of expenditure, applying the prevailing rate of allowance, calculating the “pool” of allowances entering the figure into the tax return to reduce taxable profits resulting in paying less tax.
However, rarely do construction projects and ledgers provide data in a tax friendly format or in sufficient detail to maximise a claim and it is not possible to identify qualifying expenditure ancillary to the installation of plant and machinery merely by reviewing contract documents. Unless a Capital Allowances advisor is appointed to analyse the data in detail significant tax relief will remain unidentified and unclaimed.
As part of our team, we have data scientists to develop a software application using the latest technology to help both the SMEs and their advisors to create a more accurate, and efficient claim process for tax reliefs. Adaptation to change will be part of the process and the accuracy of the outputs will increase over time by using blockchain technology. Together with industry advances in the data, future incentives will be better applied so they are directed to the specific investment.
In the coming months we will be looking for partners to assist us in testing and piloting the process; please contact Kwang-Sung Chun to register your interest on [email protected].