The call for evidence requests comments and/or meetings with the OTS on the proposals to replace capital allowances with a deduction for tangible fixed assets using accounts depreciation.
Following the announcement of the Office of Tax Simplification (OTS) review into capital allowances and depreciation, the OTS has now published a call for evidence. The project relates to tangible fixed assets only and will focus on whether the use of accounts depreciation to provide relief for capital expenditure instead of capital allowances would simplify the preparation of tax returns for incorporated and unincorporated business. At a basic level it would no longer be necessary to allocate assets to various computational pools for capital allowances, instead the treatment of assets required for preparation of the accounts would flow through to the tax return.
The call for evidence sets out a number of questions (but is not limited to them) to help inform the discussion, aligned along the following categories:
Generally accepted accounting principles (GAAP)
The questions in this section ask about accounting for depreciation, including the implications of businesses preparing their accounts under differing accounting regimes, depreciation policy, and the pros and cons of using a depreciation based regime for giving fixed asset relief.
This section covers a range of considerations, including potential adjustments needed to accounting depreciation, implications for income tax, compliance costs and current timing incentives such as the Annual Investment Allowance.
Four potential transition methods are set out, with comments requested on each, as well as questions on how much notice businesses would need for transition. Comments and/or meetings with the OTS are requested by 30 November 2017.
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