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Tax Allowances On Plant & Machinery


bogbrush

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HOLA441

I'd like to see the AIA adjusted so that its £100k or - say - 20% of existing tangible assets - whichever is greater. It could even be capped.

So, a startup could buy £100k of kit and get 100% allowance, and a business with a £10m tangible asset base wanting to add - say - £2m of kit could get 100% on all that investment.

sounds fairer to me.

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HOLA442

Thanks for the insight bogbrush.

Other than the tax deductibility of investment allowance, what are the main items that prevent you from creating value?

Is land cost (and hence your site cost as well as your employee's ultimate cost of living) a big issue ?

Do you consider yourself to be in high tech manufacturing? Or are you in low volume customised manufacturing sectors? (Just about the 2

which I think can be run profitable from the UK).

Did you start this small and grow through profit retention and reinvestment or had huge capital injection at the start ?

Thanks in advance...

Tax deductability actually isn't an issue because we ignore it in decision making. It really is as simple as "is this the right thing to do", and on from there. I don't think it's reasonable to expect that from every business, many with external shareholders or high gearing have to factor in tax and its effect on cash. My personal beef is that it's just so stupid to rig the system away from investment in what we say we desperately need.

Land cost is irrelevent, wages don't matter - from a competitive advantage point of view they are spurs to greater differentiation. Red tape is irrelevent (Health and Safety, for instance, is both a good thing and not difficult to implement). Nobody goes broke because of Health & Safety, or Rent costs or anything like that - they go broke because they aren't up to it.

To be honest nothing holds anyone back except the quality of our ideas and our balls/brains. I don't buy all this carp from UK businessmen about how hard it all is, business is suppposed to be hard otherwise it's not working properly.

We've evolved to mostly medium/high volume based on leading tech (for the industry - it's not microprocessors!).

No huge capital injections, all evolution, lot of gearing (gone now, thankfully).

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HOLA443

It would be mad, and for the simple reason that it would multiply tax;

Business A sells for £50 to Business B. Tax on £50

Business B adds a bit of value and sells to Business C for £80 (including the £50 he paid). Tax on £80, the first £50 now taxed twice.

Business C adds a bit of value and sells to Business D for £200 (including the £80 he paid). Tax on £200, the first £50 taxed thrice and the second £80 twice.

Total tax based on £510 for an item worth £200. A system designed to destroy trading overnight. I hope you'll agree it is not a good idea.

Double and triple taxation is the name of the game, if I'm taxed at source on wages have I then jettisoned my tax obligations? Nope, if I put the money in the bank and earn interest I'm taxed again, then on the double taxed money I'm still expected to pay VAT when I make a purchase. Each step pushes up transaction costs and inflates the cost of living.

As for your example, trying to rectify this by making special rules for certain individuals causes even more problems because the foundations of the tax system are corrupt. Have you heard of carousel fraud? The government try and offset the problems you describe but in doing so allow fraudsters to get away with £billions of taxpayers cash, so then some new quick fix is needed. Until new problems surface and another sticky plaster is required, rinse and repeat.

There's a fundamental problem with allowing businesses to set their own tax rates and act as informal tax collectors for the government. The loopholes incentivise all sorts of schenanigans.

Turning to your other point, business is no "special case"; your wage is all taken to be profit so it's taxed, same as a business paying tax after costs. Rent and food are not costs incurred in the course of carrying out the trade -you would have lived and eaten without the job - so they aren't offset against wages of trade. If businesses spend money that are not deemed to be in curred in the course of their trade (such as entertainment) they aren't allowed now.

So employees could get away with not eating and still be ready for work in the morning? This is misguided, there's no reason why we couldn't deduct living expenses before applying taxes on labour. The distinctions that are currently made are arbitrary, all wages aren't 'profit'.

EDIT: I did not argue for a special case for anyone based on a "notion that they perform a special function in society". Please don't turn into a fool like wonderpup, ascribing sinister motives.

Do you think we could keep this clean?

Edited by Chef
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HOLA444

Total tax based on £330 for an item worth £200. A system designed to destroy trading overnight. I hope you'll agree it is not a good idea.

The gov't currently takes 50% of GDP as tax, if the tax was set at a flat rate of 20% if would mean total tax would be £66, significantly lower than the £100 it takes now. It would also prevent VAT fraud and get rid of oodles of paperwork.

It's not ideal but better than the system we have.

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HOLA445

Double and triple taxation is the name of the game, if I'm taxed at source on wages have I then jettisoned my tax obligations? Nope, if I put the money in the bank and earn interest I'm taxed again, then on the double taxed money I'm still expected to pay VAT when I make a purchase. Each step pushes up transaction costs and inflates the cost of living.

As for your example, trying to rectify this by making special rules for certain individuals causes even more problems because the foundations of the tax system are corrupt. Have you heard of carousel fraud? The government try and offset the problems you describe but in doing so allow fraudsters to get away with £billions of taxpayers cash, so then some new quick fix is needed. Until new problems surface and another sticky plaster is required, rinse and repeat.

There's a fundamental problem with allowing businesses to set their own tax rates and act as informal tax collectors for the government. The loopholes incentivise all sorts of schenanigans.

There's no need for rectification; tax on profit works. All I'm saying is that making one class of spend - the one we say we want business to do - disallowed for a long time is plain thick.

I know of carousel fraud but it's got nothing to do with this matter. By the way, ALL tax systems create shenanigans. Your revenue tax would be easy to circumvent (I can think of ways off the bat) and would distort commerce hideously, just as an example.

So employees could get away with not eating and still be ready for work in the morning? This is misguided, there's no reason why we couldn't deduct living expenses before applying taxes on labour. The distinctions that are currently made are arbitrary, all wages aren't 'profit'.

The spend is nothing to do with the commercial activity. I'm all for no tax but this isn't a no tax thread, it's a "why treat plant investment differently?" thread.

Do you think we could keep this clean?

Absolutley, which I why I asked you not to suggest I was ascribing special status to business because they do "perform a special function". That was very wonderpup. I'm not looking for a row and I won't infer any meaning that isn't stated.

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HOLA446

The gov't currently takes 50% of GDP as tax, if the tax was set at a flat rate of 20% if would mean total tax would be £66, significantly lower than the £100 it takes now. It would also prevent VAT fraud and get rid of oodles of paperwork.

It's not ideal but better than the system we have.

No, it would result in even more stupidity and tax avoidance.

For a kick off, you would have supply chains forming into new corporate entities so the product passing through it creates no transaction, so only the end sale is taxed, with each participant holding shares in the chain. Voila! tax take knackered.

As a by product you'd destroy competition and cause higher costs and less responsive supply chains.

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HOLA447

Tax deductability actually isn't an issue because we ignore it in decision making. It really is as simple as "is this the right thing to do", and on from there. I don't think it's reasonable to expect that from every business, many with external shareholders or high gearing have to factor in tax and its effect on cash. My personal beef is that it's just so stupid to rig the system away from investment in what we say we desperately need.

Land cost is irrelevent, wages don't matter - from a competitive advantage point of view they are spurs to greater differentiation. Red tape is irrelevent (Health and Safety, for instance, is both a good thing and not difficult to implement). Nobody goes broke because of Health & Safety, or Rent costs or anything like that - they go broke because they aren't up to it.

To be honest nothing holds anyone back except the quality of our ideas and our balls/brains. I don't buy all this carp from UK businessmen about how hard it all is, business is suppposed to be hard otherwise it's not working properly.

We've evolved to mostly medium/high volume based on leading tech (for the industry - it's not microprocessors!).

No huge capital injections, all evolution, lot of gearing (gone now, thankfully).

Thanks for your respond - like your can do attitude too.

Edited by easybetman
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HOLA448

No, it would result in even more stupidity and tax avoidance.

For a kick off, you would have supply chains forming into new corporate entities so the product passing through it creates no transaction, so only the end sale is taxed, with each participant holding shares in the chain. Voila! tax take knackered.

As a by product you'd destroy competition and cause higher costs and less responsive supply chains.

Oh no, cheaper goods due to tax efficiency: what a nightmare!

Serously though, you'd probably end up with a handful of very large suppliers. A model that seems to work well with supermarkets from a consumer/cost point of view. I don't see why competition would necessarily be compromised.

Goods would become cheaper and as a result volumes would increase, something that would boost tax take.

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HOLA449

Oh no, cheaper goods due to tax efficiency: what a nightmare!

No, massively reduced tax take because huge corps with great advice would do this, meaning smaller guys without would be wiped out overnight then you'd have to put the tax rates back up to counter their shimmy resulting in insurmountable barriers to entry unless you are a member of the Tesco (or other) supply chain company.

Is that really what you want?

Serously though, you'd probably end up with a handful of very large suppliers. A model that seems to work well with supermarkets from a consumer/cost point of view. I don't see why competition would necessarily be compromised.

Goods would become cheaper and as a result volumes would increase, something that would boost tax take.

OMG you do!!!! Yeah, giant cororations killing competition. Sounds like a great idea. :rolleyes:

And all this because you don't want to tax profit but rather tax revenue. There comes a time with every idea when it's right to roll it up into a ball and put it in the waste paper bin. I think we're there with this one.

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HOLA4410

No, massively reduced tax take because huge corps with great advice would do this, meaning smaller guys without would be wiped out overnight then you'd have to put the tax rates back up to counter their shimmy resulting in insurmountable barriers to entry unless you are a member of the Tesco (or other) supply chain company.

Is that really what you want?

OMG you do!!!! Yeah, giant cororations killing competition. Sounds like a great idea. :rolleyes:

And all this because you don't want to tax profit but rather tax revenue. There comes a time with every idea when it's right to roll it up into a ball and put it in the waste paper bin. I think we're there with this one.

Oh dear, resorting to lefty soundbites to win the argument. Yes, I think we should leave it there.

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HOLA4411

Oh dear, resorting to lefty soundbites to win the argument. Yes, I think we should leave it there.

Bogbrush the leftie. I never thought I'd read that!

By the way, I never mentioned that this idea would tax a company turning over £10m making £8m the same as one making £200k. Or nothing.

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HOLA4412

Bogbrush the leftie. I never thought I'd read that!

By the way, I never mentioned that this idea would tax a company turning over £10m making £8m the same as one making £200k. Or nothing.

The issue at stake for me is the extent to which we let businesses dictate their own costs for tax purposes.

What you seem to be saying is that business should be given free reign to decide its costs but employees should have their allowance entirely set by the state.

How is this fair?

A fairer system would involve either all allowances being set by the state or all costs being tax deductable, not a two speed system based on whether you're the owner of tooling or not.

So you could have a basic personal income tax allowance for example and only tax businesses on a certain % of their revenue, regardless of the costs they incurr. Or you could just allow everyone to file their own tax returns.

Yes I know this would create loopholes and disincentives but then all taxes do this, there's no avoiding it unfortunately.

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HOLA4413

The issue at stake for me is the extent to which we let businesses dictate their own costs for tax purposes.

What you seem to be saying is that business should be given free reign to decide its costs but employees should have their allowance entirely set by the state.

How is this fair?

A fairer system would involve either all allowances being set by the state or all costs being tax deductable, not a two speed system based on whether you're the owner of tooling or not.

So you could have a basic personal income tax allowance for example and only tax businesses on a certain % of their revenue, regardless of the costs they incurr. Or you could just allow everyone to file their own tax returns.

Yes I know this would create loopholes and disincentives but then all taxes do this, there's no avoiding it unfortunately.

No, I'm saying we tax a commercial enterprise on its net income and any other idea is completely mad, unless you think a trader who buys and sells apples should be taxed on his turnover regardless of whether he offers incredible value to his customers.

Seriously, I think you've got this very mixed up. Nowehere do I say that "business should be given free reign to decide its costs". There are records you have to keep of your outgoings you know, and you have to be able to prove them. It's not just making it up.

Edited by bogbrush
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HOLA4414

No, I'm saying we tax a commercial enterprise on its net income and any other idea is completely mad, unless you think a trader who buys and sells apples should be taxed on his turnover regardless of whether he offers incredible value to his customers.

Seriously, i think you've got this very mixed up. There are records you have to keep of your outgoings you know, and you have to be able to prove them. It's not just making it up.

I havn't got anything mixed up, I'm saying that if this is such a great idea then lets roll it out across the board. Let labourers decide what their net income is too.

Who said anything about turnover? Revenue and turnover are two different things. If we're going to assume that a labourers costs are £x (curently £6.5K), then lets do this with business too. Lets assume for example that 80% of their revenue goes towards costs and the final 20% can be taxed as profit, i.e 20% tax on that final 20%.

As I say one or the other, I don't see why business owners should receive special privileges.

Edited by Chef
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HOLA4415

I havn't got anything mixed up, I'm saying that if this is such a great idea then lets roll it out across the board. Let labourers decide what their net income is too.

Who said anything about turnover? Revenue and turnover are two different things. If we're going to assume that a labourers costs are £x (curently £6.5K), then lets do this with business too. Lets assume for example that 80% of their revenue goes towards costs and the final 20% can be taxed as profit.

As I say one or the other, I don't see why business owners should receive special privileges.

Revenue IS turnover. If you mean revenue as profit then I think audited transaction-based proof of profit beats your guess any day.

Your idea seems to be that we assume profit to be a given % of turnover, despite it being different for every industry and every business within an industry, depending on efficiency, value, competition and so on.

I have never encountered such a meaningless idea in the years I've been coming on here, this is utterly without any merit whatsoever and you earlier hoped it would cause massive contraction of competition. Sorry, but it is truly silly. Find one person who agrees with you and I'll be amazed.

EDIT: A business OWNER doesn't receive any different treatment from a labourer. You think he charges his food or home rent to his gardening business? Where on earth are you dredging this stuff up from?

Edited by bogbrush
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HOLA4416

Revenue IS turnover. If you mean revenue as profit then I think audited transaction-based proof of profit beats your guess any day.

Your idea seems to be that we assume profit to be a given % of turnover, despite it being different for every industry and every business within an industry, depending on efficiency, value, competition and so on.

I have never encountered such a meaningless idea in the years I've been coming on here, this is utterly without any merit whatsoever and you earlier hoped it would cause massive contraction of competition. Sorry, but it is truly silly. Find one person who agrees with you and I'll be amazed.

EDIT: A business OWNER doesn't receive any different treatment from a labourer. You think he charges his food or home rent to his gardening business? Where on earth are you dredging this stuff up from?

I've clearly hit a nerve.

A quick explanation of revenue and turnover (In the way I intended them to mean, I know there are different interpretations)

Revenue: the amount of income a company generates from sales.

Turnover: a measure of how quickly an inventory is sold.

Profit: Money left after costs.

So my suggestion is that we pick an arbitrary number (like we do with labour) lets say 80%, book that as revenue and tax the final 20% as profit. I know that all businesses generate different margins but then labourer's costs differ too yet we make no special exceptions for them. They're given a set rate.

I find it amusing that you think business owners should be exempt from all costs, but find the application of this logic to labour an absurd idea, then you lash out when I point out your demand for special privileges!

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HOLA4417

I've clearly hit a nerve.

A quick explanation of revenue and turnover (In the way I intended them to mean, I know there are different interpretations)

Revenue: the amount of income a company generates from sales.

Turnover: a measure of how quickly an inventory is sold.

Profit: Money left after costs.

So my suggestion is that we pick an arbitrary number (like we do with labour) lets say 80%, book that as revenue and tax the final 20% as profit. I know that all businesses generate different margins but then labourer's costs differ too yet we make no special exceptions for them. They're given a set rate.

I find it amusing that you think business owners should be exempt from all costs, but find the application of this logic to labour an absurd idea, then you lash out when I point out your demand for special privileges!

There is no such "special treatment" for a business OWNER. There is a business (the commercial enterprise) and then there is the owner, a person, a human). The two are legally different. When the business owner takes money from the business he is taxed as a person. When it stays in the business is taxed as a business.

You want to tax the business on profit, but you don't want the real profit, you want an arbitary one. WTF?

You want to tax the person not on the profit of their enterprise but on the difference between their income and their living expenses. So you want to give a tax allowance to blow all your money on any old garbage, or on holidays, or a bigger house. That's the effect of your idea. WTF again.

Where on Earth do I say "business owners should be exempt from all costs"? Where is this stuff coming from?

There's no nerve hit, I just think this is the strangest idea I've ever seen. Honest.

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HOLA4418
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HOLA4420

This thread is a perfect example of how those of means seek exceptions be made to further ingrain their advantage. I can see it now if Bogbrush san got his way, Bogbrush industries would mysteriously suffer a precipitous decline in profit, and engage in a massive amount of capex spending.

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HOLA4421
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HOLA4422

This thread is a perfect example of how those of means seek exceptions be made to further ingrain their advantage. I can see it now if Bogbrush san got his way, Bogbrush industries would mysteriously suffer a precipitous decline in profit, and engage in a massive amount of capex spending.

Jeez, you don't even understand Accounts now? What would be great would be if you could actually explain that comment, with some numbers so you can illustrate what you're on about, because as written it's just drivel. Like, why would there be an incentive to have profit fall and spend load on capex.

If I got my way I'd carry on doing exactly what I am doing - making money, investing, competing and growing - and more businesses constrained by concerns over tax effects would invest alongside.

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HOLA4423
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HOLA4424

Jeez, you don't even understand Accounts now? What would be great would be if you could actually explain that comment, with some numbers so you can illustrate what you're on about, because as written it's just drivel. Like, why would there be an incentive to have profit fall and spend load on capex.

If I got my way I'd carry on doing exactly what I am doing - making money, investing, competing and growing - and more businesses constrained by concerns over tax effects would invest alongside.

What you seem to be arguing for, but are doing so in a roundabout way because you know you'll get shot down in flames, is that businesses should basically be allowed to simply send the IR a piece of paper declaring the profit made. No supporting documents, no accounts, taken at face value, and tax liability calculated on that basis. You state 'I'm not after any special favours', which is the universal cry of those in actually asking for special consideration, as indeed you are.

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HOLA4425

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