End-to-end capital allowances execution – staying ahead in a changing environment

By James May and Alf Orban

Organisations are changing their approach to managing the tax treatment of their capital expenditure. It’s important to understand why and what action they’re taking.

Accurate recording and classification of capital expenditure on fixed assets can add value to your capital allowance claims - and bring related benefits for accounting. But achieving accuracy when there are high volumes of projects, numerous information providers and large investments involved is challenging. To mitigate risk you need an efficient, consistent and controlled process which is easy to understand and in line with best practice.

We’re working with clients to introduce processes that are easily embedded into existing reporting arrangements. This allows similar claims to be made effectively and efficiently in future years. In the long term it’s also a cheaper alternative to outsourcing your calculations and analysis of expenditure to a third party, but it does require upfront investment. But bear in mind that this investment can be partially offset by using it as an opportunity to identify whether additional tax relief could be due on fixed asset additions in the current and recent years.

As you start to identify the right processes, controls and technology needed to gather the data required for claims, it’s important to engage with external stakeholders. This will help to ensure your end-to-end process is as efficient and effective as possible. Stakeholders to consult include:

  • Client portfolio companies
  • Asset managers
  • Vendors
  • HM Revenue & Customs (HMRC)
  • Contractors and other suppliers
  • Construction consultants
  • Accountants, and
  • Compliance providers.

To get the right technology solution, consider your existing technology tools as well as those of other relevant third party suppliers. You need to know what technology is in the market, and ultimately not lose sight of the fact that the right solution is designing a tailored response, giving the most appropriate framework for your particular circumstances and business relationships.

Given the current environment now is the time to consider the management of capital expenditure and there are a range of people including myself that would be happy to discuss how others are approaching this issue in more detail.

Find out more through our short video series or contact your usual PwC advisor.