ATT warns against ‘one size fits all’ capital allowances

In light of the capital allowances review announced in the Spring Statement, the Association of Taxation Technicians (ATT) is calling for all businesses of all sizes to be supported.

With the upcoming end to the corporation tax super deduction in March 2023, the Treasury announced it would be considering reforms to taxes on business investment.

The Spring Statement document outlined various options under consideration, including a permanent increase in the annual investment allowance from £200,000 to £500,000, an increase in winding-down allowances, new first-year allowances or the more costly option of full expensing for qualifying investment.

The decision on which change, or combination of changes, the Government will make is subject to a review ahead of the Autumn Budget later this year.

Michael Steed, co-chair of ATT's technical steering group, said:

"The temporarily increased Annual Investment Allowance - designed to encourage capital investment - can, in some circumstances, restrict tax relief on expenditure which would have been fully relieved under the lower permanent AIA level of £200,000.

"We think there is a real opportunity to rationalise the capital allowance system to increase its effectiveness, make it more intuitive and provide a stable and well understood structure that works for businesses of all sizes and type. What we must avoid is a ‘one size fits all' solution which fails to address the varying needs of different businesses."

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