The OTS have published a call for evidence as it begins its review of whether to replace capital allowances with depreciation.

The review relates to tangible fixed assets only. It will focus on whether the replacement of capital allowances with accounts depreciation as a way of providing relief for capital expenditure would simplify the preparation of tax returns for incorporated and unincorporated business.

It is acknowledged that some adjustments may still be required, for example to:

  • Exclude land and dwellings which do not qualify for capital allowances.
  • Base relief on original cost and not revalued or impaired amounts.

One area that the OTS are asking for comments upon is how the transition should happen, putting forward four possible options ranging from:

  • A simple switch from one basis to the other on day one to;
  • A hybrid system initially which will require two sets of calculations to be run from implementation day until all assets already held are disposed of or scrapped.

Which option is chosen will clearly have an impact on how quickly the desired simplification is achieved for many businesses.

They are asking for input directly from businesses, representative groups and professional advisers by 30 November 2017. The full OTS document can be accessed here.


Capital allowances index


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