C&W Perspectives

Capital allowances – a story of ‘how’ taking over from ‘why’ By: Jeanette Edmiston, Partner, Head of Capital Allowances Out of a taxpaying population of millions of businesses, it’s almost unbelievable to think that only 30,000 take advantage of tax opportunities. H owever, a bit of knowledge about the under-utilised and overly complex system of capital allowances could be very beneficial and help protect a valuable method of saving money. With a major review of the system having just taken place, Jeanette Edmiston looks at the story of Capital Allowances to date. The current capital allowances regime came into being in 1945. The country had been ravaged by war and needed to be repaired and rebuilt, so a new scheme that gave tax concessions to people spending money on property was introduced, to encourage investment and get the country back on its feet. The capital allowances system is still the only form of tax relief available on property. The current Act was updated in 2001, but it harks back to earlier versions in almost all of the 600 sections. Since 1945 the rates of relief have changed and new types of relief have been added. Consequently, the regime has become steadily more complex and time consuming for companies to operate. Indeed, the need to have an in-depth knowledge of the legislation and resulting case law has given many businesses the impression that this is now quite a ‘dark art’ and the domain of specialist advisors only. The piecemeal way that the rules have been amended and the inherent oddity of starting from a position where nothing in a building qualifies for relief and then navigating a series of exceptions, means it’s become unwieldy and allowed experts to challenge tax inspectors with clever arguments, securing tax relief and making it seem more like an intellectual game than routine tax compliance. So roll forward to 15th June 2018 when a report by the Office of TOPICAL The need to have an in-depth knowledge of the legislation and resulting case law has given many businesses the impression that this is now a dark art CUSHMAN & WAKEFIELD 23 TOPICAL