Search results

Explores the treatment of capital expenditure under the pre‐1990 Budget capital allowances regime, and its division into initial allowance, writing down allowance, and balancing allowance. Examines the scope for change as a result of the Budget. Concludes that the potential for tax savings under the capital allowances provisions may increase if the Chancellor extends relief to buildings outside the enterprise zones in response to current debate.

Industrial profitability in Britain has suffered badly in recent years—and is still suffering—from the effects of rapid inflation coupled with rigorous price controls. This in turn has led to widespread liquidity problems aggravated by increasing capital needs to meet the ever mounting costs of stock and plant replacement. The survival and growth of firms depend on the ability of management to adapt to the changing business environment. Under today's conditions an acquaintance with the various forms of assistance to industry offered by the Government, and their implications, is essential for those concerned with the financial aspect of management. Intelligently used, these incentives can increase the profitability, after tax, of investment in fixed assets, as well as reinforcing the cash flow needed to finance them. The available fiscal incentives fall into two main classes: those given by way of “capital allowances” on fixed assets in taxing profits; and the range of government grants and other help available to firms operating in, or moving into, the “areas for expansion”.

This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis.

The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008.

Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in year-to-year income smoothing. The authors also find that LLP and ALL provide signals about future earnings.

The authors acknowledge that the LLP account is only one of many accounts on the income statement that could be used for signaling or to manage earnings, and that the ALL is one of several accounts that could be used for signaling, earnings or capital management. Future studies could examine other accruals for their role in managing earnings, signaling and capital.

The results indicate that bank managers use LLP and ALL accounts to manage earnings management, policy makers may want to limit the ability of banks to manipulate earnings.

Prior research on the loan loss accounting practices has been based on single equation models of the determinants of LLP and ALL. An issue that has not been adequately addressed in this literature is that ALL and LLP may be interrelated and jointly determined by banks. If the two accounts are not independent of each other, failure to include one when estimating the other may lead to an omitted variable problem, while including both in the same equation induces a potential simultaneity bias. The study is the first empirical work examining whether ALL and LLP are jointly determined by banks. By jointly estimating LLP and ALL, the study permits an assessment of the magnitude of the potential error from adopting ordinary least squares estimation of a single equation model.

So much has been written in recent years about industrial buildings allowance that it would be a rare thing if anyone involved in property overlooked them. It is less widely realised, however, that a significant part of the expenditure on most modern buildings, both industrial and commercial, qualifies for capital allowances on plant and machinery. 1982 saw two important decisions of the House of Lords — Cole Brothers Ltd v Phillips and CIR v Scottish & Newcastle Breweries Ltd — in which the scope of what is included in the term ‘plant’ was reviewed (reports of these cases appear in this issue) and these and other interpretations by the courts will be considered here.

Highlights the tax advantages generated by early and effective facilities management. Reviews property expenditure relief and capital allowances and their implications for real estate and building construction or facility planning. Suggests ways that facilities managers might play a role in allowance cases.

Argues that facilities managers can no longer ignore specialist areas such as capital allowance. Explains what capital allowances are and looks at the issues involved in making a claim. Highlights the need for a sound information retrieval system and covers the problems likely to be encountered in setting up such a system.

Preamble Taxation does not escape the effects of inflation. It too is distorted by the fall in value of the national currency. No problem would arise where a tax is applied to a simple base at a single rate, with no exemptions or allowances and without a significant time lag. This is however a rare case. Certainly so far as the British direct tax system is concerned there are usually multiple rates, thresholds and other allowances and, particularly in capital taxation, there may be significant gaps in time between the date of the imposition of the tax and the time when the tax becomes payable. For example the new rates of capital transfer tax announced on 26 October 1977 would apply to the estate of a person who dies in 1978, 1998 or in the next century or would do so but for the inevitable review which will be required mainly because of inflation arising between 1977 and the date of death. If this were not adjusted the heirs of the deceased would manifestly be required to pay more capital transfer tax than the Chancellor of the Exchequer in 1977 intended them to pay. A simple example will illustrate this.

The Finance Act 1994 introduced the most significant changes to the law on capital allowances and property for nearly a decade. Focuses on these changes and examines their impact on property owners, investors and property professionals, and gives guidelines for dealing with the new time limits for notification on plant and machinery. In addition, provides a brief examination of the new legislation in relation to enterprise zone buildings.

The new system of capital allowances on machinery and plant, introduced in 1971, has not had the criticism it deserves. The authors here explain why they think its introduction has caused a sharp decline in profitability of hiring plant in the UK.

When financing capital investments, financial executives are often confronted with “lease or borrow” decisions. Leasing is financially justifiable when the non‐taxpaying lessee leases from a full taxpaying lessor. However, surveys have found that tax paying lessees do utilise the leasing market, suggesting that the tax factor is not the only consideration.