ICAEW has suggested that HMRC’s capital allowances guidance should:
- reflect recent case law wherever possible. Ideally, once a new case is decided, HMRC should consider how the decision affects its guidance and make adjustments accordingly;
- keep pace with changes to other parts of the tax code. For example, CA21210 which deals with customer lists has largely been redundant since the introduction of the intangible fixed asset rules in 2002; and
- be reviewed on a regular basis to ensure that it reflects technological developments.
The faculty has provided initial feedback on five of the seven areas identified by HMRC. This is summarised in the table below. The two remaining areas explain the meaning of plant and whether expenditure is main or special rate.
| Area | ICAEW's comments |
|---|---|
| “Entity” or “piecemeal” approach | The guidance currently suggests that any form of electrical system would constitute an integral feature, which isn’t necessarily the case. |
| Scope of “on the provision of” | Guidance should be provided on specific areas of contention, eg, the eligibility of costs arising from establishing the setting of the asset. |
| Treatment of software | The guidance should reflect the default position for companies that computer software is treated as an intangible fixed asset (if it meets the relevant conditions) unless the company elects into the capital allowances rules. |
| Whether expenditure is capital or revenue | Guidance should be added on how to deal with capital allowances claims where it is unclear whether a building has been bought to develop and sell (revenue) or rent out (capital). |
| Interactions between different allowances | It would be useful for the guidance to include a table that summarises whether certain categories of assets qualify for the annual investment allowance and/or the different types of first year allowances, including full expensing. |
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