The proposed timescale for mandatory pooling of expenditure on fixtures is ‘much too short’ to ensure that the legislation is properly understood and applied, according to the ICAEW Tax Faculty.
The need to prevent expenditure on fixtures being written off against taxable profits more than once over their economic life was understood, the Tax Faculty said in response to the consultation document Capital allowances for fixtures.
But it appeared that ‘this could be happening because property vendors are continuing to claim capital allowances when they should not be doing so’. HMRC’s proposals placed an added burden on purchasers, the Faculty said, rather than on the vendors who are ‘largely responsible for the problem’.
‘There is a considerable lack of awareness of capital allowances generally,’ the Faculty suggested. It would ‘clearly be better’ to delay implementation until April 2013.
HMRC said that in practice, where there was no agreed sale value for second hand fixtures contained in a building, the seller and the purchaser might ‘insert quite different values for the same fixtures in their respective capital allowances pools and calculations’.
Duplication of allowances would result in an ‘uneven playing field’, the consultation paper said. HMRC were ‘analysing relevant cases’ to estimate the revenue loss.
The government is considering a requirement that businesses pool their expenditure on fixtures within a short period after acquisition. The purchaser and vendor of a second hand building would be required to agree the amount of the sale price attributable to the fixture and notify that amount to HMRC.
The CIOT’s response to the consultation included a call for a ‘fundamental review’ of the capital allowances legislation. ‘This review should include an open discussion to reassess whether abolishing capital allowances and replacing them with commercial depreciation supplemented by targeted capital expenditure incentives/disincentives to meet policy objectives is practical, possible and/or affordable,' the CIOT said.
The proposed timescale for mandatory pooling of expenditure on fixtures is ‘much too short’ to ensure that the legislation is properly understood and applied, according to the ICAEW Tax Faculty.
The need to prevent expenditure on fixtures being written off against taxable profits more than once over their economic life was understood, the Tax Faculty said in response to the consultation document Capital allowances for fixtures.
But it appeared that ‘this could be happening because property vendors are continuing to claim capital allowances when they should not be doing so’. HMRC’s proposals placed an added burden on purchasers, the Faculty said, rather than on the vendors who are ‘largely responsible for the problem’.
‘There is a considerable lack of awareness of capital allowances generally,’ the Faculty suggested. It would ‘clearly be better’ to delay implementation until April 2013.
HMRC said that in practice, where there was no agreed sale value for second hand fixtures contained in a building, the seller and the purchaser might ‘insert quite different values for the same fixtures in their respective capital allowances pools and calculations’.
Duplication of allowances would result in an ‘uneven playing field’, the consultation paper said. HMRC were ‘analysing relevant cases’ to estimate the revenue loss.
The government is considering a requirement that businesses pool their expenditure on fixtures within a short period after acquisition. The purchaser and vendor of a second hand building would be required to agree the amount of the sale price attributable to the fixture and notify that amount to HMRC.
The CIOT’s response to the consultation included a call for a ‘fundamental review’ of the capital allowances legislation. ‘This review should include an open discussion to reassess whether abolishing capital allowances and replacing them with commercial depreciation supplemented by targeted capital expenditure incentives/disincentives to meet policy objectives is practical, possible and/or affordable,' the CIOT said.
