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Capital allowances reform: assessing the options to encourage greater private sector investment

Suzanne Alcock (FTI Consulting) assesses the various options intended to redress the current low levels of capital investment. 

During the recent Spring Statement the chancellor expressed his concerns that the level of capital investment by private businesses in the UK is low compared with the OECD. UK investment averages 10% of GDP compared with 14% across the OECD (Spring Statement 2022 para 4.22). The government believes that this combined with other factors may result in lower productivity and projected growth.

Despite the competitive headline rates of corporation tax without the temporary first-year allowances (FYAs) of 130% super-deduction and 50% special rate allowance (SR allowance) the generosity of the UK’s tax regime for capital investment lags behind our competitors (Spring Statement 2022 para 4.31).

One measure set out in the government’s Tax plan is ‘to cut and reform business taxes to create...

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