There is lots for businesses to get to grips with in the autumn budget, not least the significant changes to NI thresholds and tax rates but at least from a capital allowances perspective the news is quiet and relatively positive.
A commitment to maintain current allowances
Today’s budget promised to keep ‘full-expensing’ for the term of this Parliament and revisit earlier proposals announced before the general election to extend the 100%/50% First Year Allowances (FYAs) to assets bought for leasing.
The Chancellor also committed to maintain the 100% Annual Investment Allowance for plant and machinery (P&M) up to £1 million and existing writing down rates for P&M (18%/6%) and Structures and Buildings Allowances (3%/10%).
100% First Year Allowances for zero-emission cars and EV charge points will be extended to 31 March 2026 for corporation tax and 1 April 2026 for income tax purposes.
A commitment to provide clarity and further simplification with special consultations on predevelopment costs (2024) and new clearance processes for major projects (Spring 2025).
Clarity on what qualifies for different capital allowances. The government will provide businesses with greater clarity on what qualifies for capital allowances to help make investment decisions. HMRC has already issued a number of guidance changes following discussions with industry and tax experts on common areas of uncertainty such as the treatment of computer software and the interaction between the annual investment allowance and full expensing.
Simplification. The government is grateful for contributions to the existing full expensing simplification industry working group, and responses to the technical consultation. As the legislation to make full expensing permanent is already in place, we will proceed with this work to a slower timeframe over this Parliament. This exercise is not intended to materially change which expenditure is eligible for full expensing or the way in which it is claimed. Rather, it aims to consolidate and simplify the Capital Allowances Act 2001, making the capital allowances system more straightforward for businesses.
Predevelopment costs. The government is aware of business concerns regarding predevelopment costs, following the Gunfleet Sands Ltd and others vs. HMRC (2023) decision. We will explore this carefully with affected stakeholders through a consultation to be launched in the coming months, to help inform the government’s next steps and potential options. A core pillar of our Growth mission is to encourage investment in renewable energy and major infrastructure projects, and the government is therefore keen to understand the impact of the tax rules on the costs of such investments.
Land Remediation Relief Consultation (Spring 2025)
Building more is key to raising everyone’s living standards and boosting economic growth. The government is committed to a brownfield first approach, prioritising the development of previously used land wherever possible.
The government recognises the positive impact that Land Remediation Relief can have to further this goal, by providing extra tax relief for the substantial costs involved in cleaning up contaminated or derelict land and preparing it for redevelopment.
There have been limited changes to Land Remediation Relief over the last 23 years, since it was first introduced in 2001 and amended in 2009. Following the publication of the Office for Tax Simplification’s review of tax reliefs, government consulted on the removal of Land Remediation Relief in 2011 but decided against its removal.
Given the amount of time since the last review of the tax relief and the potential for the relief to help progress the government’s objectives, the government will launch a consultation to review the effectiveness of Land Remediation Relief in Spring 2025. This will determine whether it is still meeting its objective of boosting development on brownfield land and evaluate its value for money.
Such a review is well overdue, and we await the details with interest.
Full details of the above can be found in the Corporate Tax Roadmap and if you have any questions, I will be delighted to hear from you.