Government to consult on capital allowances simplification

A consultation on possible plant and machinery capital allowances simplification will be held in early 2024.

Consultation expected early 2024

The recent Autumn Statement announced a permanent full expensing regime for expenditure on plant and machinery. This decision has brought with it a consultation on possible simplifications to the system of capital allowances on plant and machinery. The consultation is to run from January to Summer 2024. In this article we discuss what this may include. 

From the Government’s announcement we know more about what the consultation will not cover than what it will address. It is focused only on plant and machinery allowances and not other forms of capital allowances such as Structures and Buildings Allowance and Research & Development allowances. It is not focused on the system of first year allowances as opposed to writing down allowances. Nor is it focused on the boundaries of what qualifies as plant or machinery. What then does that leave as its actual subject matter? It would be pure speculation, but it is possible that the complexity of some of the anti-avoidance rules might be a fruitful subject of a consultation. 

In the past, thought has been given from time to time to a wholesale shake-up of the system of capital allowances (for example in the then-Inland Revenue’s 1995 tax law simplification report and again in 2018 in the lead up to IFRS 16 implementation). Nothing material came of these proposals, barring the ‘plain language’ rewrite of the Capital Allowances Act 1990 as the Capital Allowances Act 2001. We shall have to see what happens on this occasion.

Looking even further ahead to Summer 2024 there is also to be a separate specific capital allowances consultation on the possible extension of full expensing to lessors - we discuss this in a separate article.