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The Key Elements of the Recent Reforms

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Different classes of capital expenditure attract different capital allowances in the following ways: expenditure on plant and machinery may be ‘ written down’ on a 25% declining-balance basis. A higher, 40%, allowance is available in the first year for expenditure by small and medium-sized companies; in 2006-07 this was increased to 50% for small companies for one year only, expenditure on industrial buildings and hotels is written down on a straight-line basis of 4% per year, expenditure on commercial buildings may not be written down at all, intangible assets expenditure is written down on a straight-line basis at either the accounting depreciation rate or a rate of 4%, whichever the company prefers, capital expenditure on plant, machinery, and buildings for research and Development (R& D) is treated more generously: under the R& D allowance, it can all be written off against taxable profits immediately.

Different classes of capital expenditure attract different capital allowances in the following ways: expenditure on plant and machinery may be ‘ written down’ on a 25% declining-balance basis. A higher, 40%, allowance is available in the first year for expenditure by small and medium-sized companies; in 2006-07 this was increased to 50% for small companies for one year only, Expenditure on industrial buildings and hotels is written down on a straight-line basis of 4% per year, Expenditure on commercial buildings may not be written down at all, Intangible assets expenditure is written down on a straight-line basis at either the accounting depreciation rate or a rate of 4%, whichever the company prefers, Capital expenditure on plant, machinery, and buildings for research and Development (R& D) is treated more generously: under the R& D allowance, it can all be written off against taxable profits immediately.

Tax Reforms in the system: The Tax system from the perspective of incentives to work and efficiency: Since the year 1997, the government of the UK has been taking many measures in order to bring more benefits from the tax system and also to bring the system closer to the public.   The government has pursued certain policies like The Working Families’ Tax Credit and the Disabled Person’ s Tax Credit etc.   These policies were introduced in the year 1999. A support system that was more integrated was also set up in addition to these policies.

In the year 2003, a new employment tax also accompanied these.     Out of all the above-mentioned policies which were designed to provide maximum tax benefits to the customers, The Working Families Tax Credit (WFTC) was the most important reform. The key elements of the recent reforms are: The introduction of the Working Families’ Tax Credit (WFTC) to replace Family Credit phased in over 6 months from October 1999. These changes have been accompanied by increases in out-of-work benefits for families with children.

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