HMRC Capital Allowance Statistics 2019

Capital Allowances are a deduction made against taxable profits for items of capital investment, the most common methods being Annual Investment Allowances, Main and Special Rate Writing Down Allowances and various other First Year Allowances, all designed to encourage investment in certain sectors and locations.

The data used to produce these statistics, both for receipts and liabilities, comes from the HMRC administrative system for company taxation, COTAX

Here we look at the key points from the latest statistics released by HMRC;

  • a 10% increase in amount claimed, from £88 billion in 2016-17 to £97 billion in2017-18.
  • Manufacturing claims account for the greatest amount of Capital Allowance overall, accounting for 13% of all claims.
  • Construction claims comprise the most AIA claims as a proportion of their overall total, reflecting the large number of smaller companies in this sector.
  • The 8 sectors accounting for 80% of the value of Capital Allowances claims – Manufacturing / Financial and Insurance / Wholesale and Retail Trade / Information and Communication / Mining and Quarrying / Administrative Support, Public Administration and Social Services / Transport and Storage / Electricity, Gas, Steam and Air Conditioning – only comprise 42% of all companies liable for corporation tax 

Sachin Chauhan, Managing Director of Innovation Tax Specialists commented;

“The good news is that Capital Allowances claims are on the rise, and with the Annual Investment Allowance (AIA) currently set at £1million, further increases are expected. Many companies are investing in plant and machinery, especially in the manufacturing sector, and with further Government support via local and national Grant schemes, the investment in capital expenditure will enable businesses to scale production, add new capabilities, automate and streamline processes as well as keeping up with demand.”

Taz Esmailji, Tax Director of Innovation Tax Specialists added;

“Companies continue to invest in modern, more efficient plant and machinery and the Government is also supporting this environmental drive by offering a 100% first-year allowance for expenditure on electric charge-point equipment and a 0% BIK rate for fully electric company cars. Research and Development Allowances (RDA’s) also offer a 100% allowance and are often overlooked by companies claiming R&D relief. Although many SME’s will fall within the new £1m Annual Investment Allowance, connected companies have to share this allowance. As a result, correctly and accurately pooling capital expenditure becomes vital for cash flow.”

Over the last 6 years, Capital Allowance claims have increased by 36%, from £72 billion in in 2012-13 to £97 billion in 2017-18. This is despite a £3 billion decrease between 2015-16 and 2016-17.

After a 20% drop in AIA claims from 2015-16 to 2016-17, in response to the change in AIA threshold from £500,000 to £200,000, AIA claims have held constant at £13 billion, driven by slight increases in claims in the Manufacturing and Financial and Insurance sectors, and by decreases in claims in the Mining and Quarrying sector.

Eight sectors account for 80% of Capital Allowances claims, though these sectors comprise only 42% of all companies liable for CT – Manufacturing; Financial and Insurance, Wholesale and Retail Trade; Information and Communication; Mining and Quarrying; Administrative Support, Public Administration and Social Services; Transport and Storage; and Electricity, Gas, Steam and Air Conditioning.

The Mining and Quarrying sector claims a relatively high proportion of Capital Allowance in the other assets category. This has remained similar to previous years. It likely reflects the small number of companies in this field (AIA is restricted to one allowance per company group) and the existence of specific Mineral Extraction Allowances.

The Construction sector claims the most AIA as a proportion of their total Capital Allowance claims, reflecting the large number of smaller companies in this sector.

Innovation Tax specialise in helping companies access vital funding and tax incentives to enable their businesses to grow, increase profitability, reduce risk and enable further investment in R&D and capital investments.

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