A bodge job... E3 Consulting Review HMRC’s Latest Consultation Paper on Capital Allowances Reform

Simplification, added taxpayer burden or years of litigation on missed allowances? Alun Oliver and James Daniels review HMRC’s latest consultation paper

bodge tax

On 31 May 2011, HMRC published a consultation paper proposing important changes to the capital allowances regime on fixtures in buildings. Although HMRC admit their inability to cope with the current flow of capital allowances claims and to properly apply the existing rules and case precedents, they have proposed drastic new changes that will affect all businesses spending money on property. The consultation period closed on 31 August 2011 and the changes could be implemented as soon as next April within the Finance Act 2012.

There are four main proposals:

  • imposing a time limit on when expenditure on plant and machinery, including fixtures, is required to be pooled (claimed) after acquisition;
  • restricting the minimum transfer value a purchaser and vendor can adopt for a CAA 2001, s 198 election to the tax written down value (TWDV) of the asset;
  • requiring the purchaser and vendor to decide a single agreed value verifying the amount of the sale price attributable to the fixtures, which both parties should record and formally notify to HMRC within one or possibly two years; and
  • tightening the anti-avoidance rules within CAA 2001, s 197, to prevent the increase of capital allowances claims on fixtures by artificial arrangements.

To read the full article, please download the pdf on the right hand side.

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