Responding to the consultation on proposed capital allowances reforms, the CIOT urges the UK government to prioritise stability and consistency, and to develop clear policy aims around the types of investment it seeks to incentivise.
Key points include:
‘Overwhelming feedback’ suggests that long-term stability and certainty around available reliefs are more important to businesses than any particular rate of relief, with ‘seemingly constant chopping and changing of reliefs’ likely to undermine investor confidence.
For many businesses, simplicity in the tax system is at least as attractive (potentially more so) than increased tax incentives and reliefs.
Although targeted reliefs to incentivise particular types of expenditure inevitably introduce complexity, smaller businesses least able to deal with the associated compliance burden benefit from the simplicity of the annual investment allowance (AIA).
The AIA should be set permanently at an appropriate level.
Feedback from businesses also suggests that tax reliefs that have a more direct impact on the profit and loss account (eg reliefs providing credits, like RDEC) are more visible to decision makers than allowances deducted as part of the tax computation.
More immediate reliefs could provide greater incentive for investment – for example, a reduction in PAYE and NIC at the time the capital expenditure is incurred.
As also noted by the ATT in its response, the super-deduction was something of a blunt tool, which rewarded existing decisions to invest rather than encouraging new investment.
Responding to the consultation on proposed capital allowances reforms, the CIOT urges the UK government to prioritise stability and consistency, and to develop clear policy aims around the types of investment it seeks to incentivise.
Key points include:
‘Overwhelming feedback’ suggests that long-term stability and certainty around available reliefs are more important to businesses than any particular rate of relief, with ‘seemingly constant chopping and changing of reliefs’ likely to undermine investor confidence.
For many businesses, simplicity in the tax system is at least as attractive (potentially more so) than increased tax incentives and reliefs.
Although targeted reliefs to incentivise particular types of expenditure inevitably introduce complexity, smaller businesses least able to deal with the associated compliance burden benefit from the simplicity of the annual investment allowance (AIA).
The AIA should be set permanently at an appropriate level.
Feedback from businesses also suggests that tax reliefs that have a more direct impact on the profit and loss account (eg reliefs providing credits, like RDEC) are more visible to decision makers than allowances deducted as part of the tax computation.
More immediate reliefs could provide greater incentive for investment – for example, a reduction in PAYE and NIC at the time the capital expenditure is incurred.
As also noted by the ATT in its response, the super-deduction was something of a blunt tool, which rewarded existing decisions to invest rather than encouraging new investment.
