Capital allowances: clarification of allowances for costs of altering land
Published 29 October 2018
© Crown copyright 2018
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This publication is available at https://www.gov.uk/government/publications/clarification-of-capital-allowances-for-costs-of-altering-land/capital-allowances-clarification-of-allowances-for-costs-of-altering-land
Who is likely to be affected
Businesses who claim capital allowances on the cost of altering land for the purpose only of installing plant or machinery.
General description of the measure
The measure amends legislation in sections 21 and 22 Capital Allowances Act 2001 to clarify which expenditure on altering land may qualify for capital allowances for the purposes of installing plant or machinery.
Allowances are intended to relieve the cost of altering land necessary to install only plant or machinery eligible for capital allowances. They are not intended to relieve the cost of altering land to install assets (most buildings and structures) that are ineligible for capital allowances.
Policy objective
The measure will put beyond doubt Parliament’s intention that land alteration expenditure may qualify for plant or machinery capital allowances only where the plant or machinery itself qualifies for capital allowances.
Background to the measure
This measure was announced at Budget 2018.
Capital allowances provide tax relief for expenditure on the provision of qualifying plant or machinery. Capital expenditure on altering land only for the purposes of installing qualifying plant or machinery may qualify for capital allowances where the plant or machinery being installed also qualifies.
Budget 2018 also announces a new relief for structures and buildings which will provide relief for land alteration connected to the construction of structures and buildings.
Detailed proposal
Operative date
The measure will have effect for claims on or after 29 October 2018.
Current law
The current law is contained in Capital Allowances Act 2001 section 21, section 22 and section 23.
Proposed revisions
Legislation will be introduced in Finance Bill 2018-19 to clarify the scope of the relief given by Capital Allowances Act 2001 for altering land in connection with qualifying expenditure on plant and machinery.
Capital Allowances Act 2001 provides for relief for expenditure on the provision of plant or machinery. Sections 21 and 22 provide that expenditure on the provision of plant or machinery does not include expenditure on certain buildings, structures, assets and works. This is subject to exceptions detailed in section 23.
This measure amends sections 21 or 22 to make it clear that any reference to “plant” in section 23, List C does not apply to assets listed in sections 21 or 22.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure supports the Exchequer in its commitment to protect revenue.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure has no impact on individuals as it only affects businesses. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that this measure will have impacts on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to impact on a small number of businesses that install plant and machinery via land alteration. Whilst high in capital expenditure value terms, the number of these businesses are low in volume. One-off costs could include familiarisation with this measure and updating software. It is not expected that there will be any on-going costs. There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
There are no operational impacts.
Other impacts
There are no impacts on climate and fuel poverty targets or air quality targets.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through tax return forms.
Further advice
If you have any questions about this change, contact Tunde Ojetola on telephone: 03000 585 916 or email: tunde.ojetola@hmrc.gsi.gov.uk.