The Office of Tax Simplification has published a call for evidence as it starts its review on capital allowances (CAs) and depreciation. The review covers tangible fixed assets only and looks at whether providing relief for capital expenditure through accounts depreciation, rather than CAs, would simplify the preparation of tax returns for incorporated and unincorporated businesses. Responses should be sent by 30 November 2017.
At a basic level, it would no longer be necessary to allocate assets to various computational pools for CAs, but the treatment of assets required for preparation of the accounts would instead flow through to the tax return. The OTS acknowledges, however, that some adjustments would be necessary; for example, to ensure that capital expenditure would continue to be based on cost (not valuation) and to exclude certain assets such as land and dwellings. The paper asks whether, overall, the use of accounts depreciation would make preparation of the tax return simpler or more complex.
One such area of complexity might be the transition from one form of relief to another and the paper sets out several options for dealing with assets owned at the implementation date. These options include:
starting the new depreciation system from the date the current CA system ceases;
as above, but without future relief for currently non-qualifying assets;
run out existing assets under the existing CA structure for either an unlimited or a limited period; or
run out existing assets with a simpler structure; for example, based on deferred tax balances at the implementation date.
Separately, the OTS has set out its future work programme, with four projects provisionally planned for the next 12 months, including: the role of technology; reliefs for investment; taxation of savings and investments; and IHT. Over the longer term, the OTS will continue to look at making tax digital, the gig economy and international aspects of the tax system. The report on VAT is expected in October or November. See http://bit.ly/2kiZwby.
The Office of Tax Simplification has published a call for evidence as it starts its review on capital allowances (CAs) and depreciation. The review covers tangible fixed assets only and looks at whether providing relief for capital expenditure through accounts depreciation, rather than CAs, would simplify the preparation of tax returns for incorporated and unincorporated businesses. Responses should be sent by 30 November 2017.
At a basic level, it would no longer be necessary to allocate assets to various computational pools for CAs, but the treatment of assets required for preparation of the accounts would instead flow through to the tax return. The OTS acknowledges, however, that some adjustments would be necessary; for example, to ensure that capital expenditure would continue to be based on cost (not valuation) and to exclude certain assets such as land and dwellings. The paper asks whether, overall, the use of accounts depreciation would make preparation of the tax return simpler or more complex.
One such area of complexity might be the transition from one form of relief to another and the paper sets out several options for dealing with assets owned at the implementation date. These options include:
starting the new depreciation system from the date the current CA system ceases;
as above, but without future relief for currently non-qualifying assets;
run out existing assets under the existing CA structure for either an unlimited or a limited period; or
run out existing assets with a simpler structure; for example, based on deferred tax balances at the implementation date.
Separately, the OTS has set out its future work programme, with four projects provisionally planned for the next 12 months, including: the role of technology; reliefs for investment; taxation of savings and investments; and IHT. Over the longer term, the OTS will continue to look at making tax digital, the gig economy and international aspects of the tax system. The report on VAT is expected in October or November. See http://bit.ly/2kiZwby.
