Capital allowances

FORTHCOMING CHANGE relating to the tax treatment of predevelopment costs: On 13 July 2026, the government launched a consultation on the tax treatment of predevelopment costs following the conclusion of the litigation that culminated in the Supreme Court judgment in Orsted West of Duddon Sands (UK) Limited. The consultation, which has a closing date of 21 September 2026, seek views and evidence on the types of costs incurred, any uncertainty in the current treatment, and the impact on investment decisions. The consultation document indicates that the government is not currently minded to legislate to change the tax treatment of these costs, but wants to understand the issues more fully. For more information, see News Analysis: Legislation Day: Draft Finance Bill 2027—Tax analysis.

Capital allowances are a form of corporation tax or income tax relief for some, but not all, capital expenditure. A business will reduce, or write down, the value of many of its capital assets in its accounts year by year using a process known as depreciation or amortisation. Accounts depreciation is generally not tax-deductible. In its tax return, the business will replace depreciation