Temporary increase in Annual Investment Allowance (AIA)

Mon 29 Oct 2018

The AIA will, for all qualifying investments made on or after 1 January 2019 and before 1 January 2021, increase to £1m from the current level of £200,000.

This is a very welcome move for SMEs but it brings with it the same problems as earlier temporary increases.

Significant computational issues gave rise to some rather odd results for businesses depending upon their accounting period that straddled the date of change and the precise timing of the expenditure.

The UK productivity lags behind some of our European neighbours and therefore any change or incentive to increase capital investment in the UK is to be welcomed as this is likely to be on productivity-enhancing assets.

Capital allowances – AIA of £500k until end of 2015

Yet again we had a Budget announcing a change in the amount of the annual investment allowance. From 1 April 2014 the AIA increases from £250,000 to £500,000. The amount of the AIA, which was due to remain at £250k until December 2014 before reverting to £25k, has varied wildly since introduction: 1 April 2008 to […]

Keyl v HMRC – discontinuance of trade and Annual Investment Allowance

The case of Keyl v HMRC considers the application of the general exclusion from claiming annual investment allowances (AIA) in a period where the activities of the business are permanently discontinued, and in particular, considers whether the discontinuance of a trade at the end of an accounting period falls within that accounting period. Mr Keyl […]

Tribunal confirms that AIA is not available to a mixed member partnership

Drilling Global Consultant LLP was a limited liability partnership between an individual (JLT) and a company (TCL). The partnership owned an aircraft. JLT used it for business (80%) and pleasure (20%). All profits and losses of the partnership were allocated to TCL. The partnership incurred capital expenditure on upgrading the plane. TCL asserted it was […]

Closing the loopholes

As has become traditional in recent budget and autumn statements, the Government has introduced anti-avoidance provisions to address areas of avoidance. Two new sets of draft legislation relate to capital allowances. HM Treasury have moved to legislate in respect of tax schemes relating to capital allowances which have been disclosed to HM Revenue and Customs. […]

Enhanced capital allowances

Enterprise zones Enhanced capital allowances (ECAs) were introduced in 2012 for a five year period to 31 March 2017 (s45K-N CAA 2001). Companies investing in plant and machinery for use in designated assisted areas within Enterprise Zones can claim 100% ECAs, subject to certain conditions. It was announced in the Budget that this relief is […]

Still life in the old master: 225 year old painting CGT exempt as plant!

The Court of Appeal (link) has held that in particular and unusual circumstances the gain on disposal of an old master portrait was a wasting asset and therefore exempt from CGT. The oddity is that although the picture was an old master (“Omai” by Sir Joshua Reynolds) and clearly likely to be preserved indefinitely, it […]

Buyers of business property will lose fixtures capital allowances if the vendor could have pooled but didn’t

Finance Act 2012 introduced changes to the capital allowances rules for fixtures in buildings. The purpose of these changes is to align the acquisition and disposal values of fixtures for capital allowance purposes when property is bought and sold, so that expenditure on a fixture is written off only once against taxable profits over its […]

EC revision to block exemption from State Aid requires changes to capital allowances rules

The European Commission general block exemption regulations (GBER) changed on 1 July 2014. Some advantageous capital allowance reliefs avoid challenge as State Aids by being framed to comply with the GBER. In order to remain protected from challenge changes are being made.

Corporation Tax main rate falls to lowest level in history, QIP changes for large companies and Annual Investment Allowance permanently increased to £200k

The Chancellor announced in the Summer Budget that the rate of corporation tax will eventually fall to 18%. However, companies and groups with taxable profits of £20m or more will need to pay their quarterly instalments of corporation tax in the accounting period the profit arises in. Finally, the Annual Investment Allowance, due to fall […]

Annual Investment Allowance made Permanent at £200,000

The Chancellor pledged in the March Budget that the Annual Investment Allowance would increase from the £25k currently legislated to come into effect on 1 January 2016. In the Summer Budget, he delivered on that promise, setting the Annual Investment Allowance at £200k from 1 January 2016 and maintaining the Allowance at that level thereafter […]

Budget 2020 – Increase in Structures and Buildings Allowance from 2% to 3%

The 2020 Budget announced that the Structures and Building Allowance (“SBA”) will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax. For accounting periods that straddle these dates, the new rate will be prorated. Commenting on the new Government’s plans […]

Capital allowance position on disposal of an asset previously subject to the Tonnage Tax regime

The First tier Tribunal (FTT) case of Unicorn Tankships (428) Ltd (UT428) held that HMRC were not entitled to adjust the disposal value of a ship for the period during which it had been within the tonnage tax regime. HMRC argued that the favourable rates under the tonnage tax regime meant that capital allowances had […]

Capital allowances for caravans _ Paul Telfer

In Paul Telfer [2016], the FTT held that capital allowances were not available to an employee who provided a caravan, as required by his employer, so that he could carry out his duties as an assistant warden of caravan sites. The FTT applied the functional test in Benson v The Yard Arm Club Ltd and […]

Consultation on the tax aspects of accounting changes for leases

On 1 December HMRC released two consultations concerning the tax implications for leasing of adopting IFRS16: A consultation on maintaining as far as possible the existing tax treatment for plant or machinery leases when IFRS16 is adopted in 2019, with tax changes taking effect from 1 January 2019. A consultation on amending the corporate interest […]

Timing of intra-group expenditure for capital allowance purposes

The First tier Tribunal (FTT) has rejected a claim that an intra-group payment should be treated as incurred on the date of payment. The FTT decision proceeded from the fact that arrangements appeared to have been put in place to try to gain access to the special allowance for a ring fence trade (CAA 2001 […]

Updates to the energy technology list for capital allowances effective 22 March 2018

SI 2018/268 updates the Energy Technology Criteria list and the Energy Technology Product list to those issued by the Department of Business, Energy and Industrial Strategy on 26 February 2018. The regulation comes into force on 22 March 2018. The list is accessible here. The list has been amended to include: Evaporative air coolers Saturated […]

Situations where a tax claim made outside the normal time limit, can become valid

The First tier Tribunal has held that, by HMRC raising an enquiry into a return filed after the deadline for making a capital allowance claim, the out of time claim becomes validly made as a result of FA 1998 Sch18 para 82(1)(b). The tax legislation provides the ability for a taxpayer to make certain claims […]

Office of Tax Simplification report on simplifying tax relief for fixed assets

The Office of Tax Simplification (OTS) has released its report on simplifying tax relief for fixed assets and whether capital allowances should be replaced by accounting depreciation. In broad summary they conclude that any benefits of moving to accounts depreciation do not justify the disruption and change that would arise from moving from capital allowances. […]

Whether expenditure relating to land qualifies for capital allowances

The First Tier Tribunal (FTT) has partially allowed claims by SSE Generation Limited (SSE) that expenditure incurred in construction and rectification works on an underground hydroelectric power scheme qualified for capital allowances. The case is a helpful summary of the principles to use in identifying expenditure that can qualify for plant or machinery capital allowances. […]

Summary of recent business tax cases – Summer 2019

This article highlights some recent business tax cases. For a further discussion of any of the issues involved, please get in touch with a member of the Mazars corporate tax or personal tax teams. Whether construction expenditure for a ‘tails management facility for storing dangerous material concerning uranium enrichment could be plant. This is an […]

When is capital expenditure classified as plant or machinery or an excluded structure or building for tax?

The Upper Tribunal (UT) decision in SSE generation is a helpful decision in clarifying the capital allowance distinction between ‘plant & machinery’ and ‘buildings and structures’. HMRC’s appeal against the previous First Tier Tribunal (FTT) decision (see here) was rejected, so that a range of disputed expenditure (including tunnels and aqueducts) associated with a hydro-electric power generation […]

Finance Bill 2016 – Corporation Tax and Income Tax anti-avoidance: capital allowances and leasing

On 25 November 2015 HMRC published a policy paper announcing measures that took immediate effect to counter abusive practices involving plant and machinery capital allowances and leasing arrangements. These changes are estimated by HMRC to save the exchequer £5m between 25 November and 31 March and produce savings of £25m, £40m and £30m in the next […]