Every year, the chancellor of the exchequer provides an autumn statement to parliament which serves to update parliament on the government’s plans for the economy. This year the autumn statement is scheduled for 3 December 2014.

Ahead of this, the government provided an opportunity for interested parties to contribute their views on which issues should be included in the speech. The Law Society’s Tax Committee submitted proposals in response, which focus on the simplification of several areas of tax law. These include: management expenses, transfer pricing and capital allowances, in particular the income versus capital distinction.

In our response, we note that very few territories have such an income versus capital distinction. It delays deduction for commercially necessary expenditure and produces arcane enquiries into whether expenditure has been incurred on achieving a repair or an enhancement. Queries arise as to whether there is an advantage which enures for the benefit of a trade (one would hope all repairs extend the life of an asset which is an advantage which enures for the benefit of the trade); and discussions ensue as to whether the expenditure was actually incurred within a period of accrual of the expenditure.

The time spent on such analysis as this could be saved by the removal of the income versus capital distinction for business expenditure for the purposes of the trade.