Draft Finance Bill 2012: Proposed changes to capital allowances show that government has listened to business Christine Oates, tax partner at Ernst & Young comments on the Capital Allowances legislation, released in today’s draft Finance Bill:
“The changes announced today to capital allowances have evolved from those proposed in the consultation process. It is excellent to see that the views of business and advisors have been considered and the draft legislation developed accordingly.
“Our main concern was that companies would have just one year to pool fixtures for capital allowances relief, new or old. But for businesses completing major infrastructure projects, which sometimes take place over a 5 or even 10 year timeframe, it would have resulted in a major compliance burden. The Government has clearly listened to the feedback and has dropped the short time requirement completely. Instead, companies simply need to ‘pool’ the fixtures prior to a subsequent transfer to someone else. This is welcome news for all companies, but particularly those that engage in substantial long life projects such as utility companies.
“Some pragmatism has also been shown on sale situations. The existing process of vendor and purchaser agreeing the value of fixtures transferred will be enforced rather than a new process being introduced. There is some recognition that sometimes the two parties won’t reach a commercial decision over this value and in which case, either party can apply to a Tribunal to arbitrate the value. This sounds like a helpful process for those in dispute but I wonder whether the desire to avoid a Tribunal will motivate more people to simply reach agreement.”
“We expected more legislation and more process so today’s announcement is a welcome step forward and re-enforces the existing legislation rather than introducing sweeping changes.”