The Association of Taxation Technicians (ATT) is concerned that proposed reforms to capital allowances will negatively impact small businesses.

In Spring Statement 2022, new reforms were proposed to the capital allowance regime. In May, the Treasury released a consultation asking for stakeholder views on these changes.

The proposals include a permanent increase to the annual investment allowance (AIA), which allows most businesses to deduct the total amount of qualifying plant and machinery expenditure up to an annual limit.

Another potential reform is an increase in the rates of writing down allowances (WDAs) which give tax relief for plant and machinery not covered by the AIA.

Senga Prior, chair of the ATT's technical steering group, said:

"Before he reports back on these proposals at the autumn 2022 budget, we urge the Chancellor to look not only at how to incentivise great capital investment by high-spending businesses but also at how to simplify the capital allowance rules for smaller businesses and make them more coherent."

Prior continued to say the Chancellor should avoid a ‘one size fits all' solution and support business investment. Otherwise, there's a risk of new enterprise and growth in the UK failing.

"We also suggest setting an appropriate AIA limit and sticking to it, rather than making repeated, often last minute, changes which reduce certainty and can catch out smaller businesses," she said.

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