For many property owners, whether they are an investor or an owner occupier, the issue of capital allowances is often ignored at the time of the transaction or put aside for consideration later.
This is especially the case if there is little or no taxable profit against which the capital allowances can be used.
In the past, this was acceptable as it did not lead to a ‘permanent’ loss of tax relief as the capital allowances could be claimed at any time in the future. However, as a result of changes that came into effect in April 2014, capital allowances on the purchase of fixtures in a property must be investigated fully prior to exchange of contract. Where the seller was entitled to claim capital allowances the parties must agree, within 2 years of purchase, a value at which the fixtures are transferred, otherwise they are lost forever.
We have been advising property owners for more than 20 years, liaising with their lawyers, surveyors and accountants throughout the acquisition process. This experience ensures we are ideally positioned to fully protect your interests and help you achieve the highest level of capital allowances to which you are entitled.
Establishing the scope for CA’s taking into account the past history of claims made on the property.Ensuring that CA’s are given the appropriate priority in the heads of terms.
Ensuring that CA claims are maximised by the seller – either for retention or to pass onto the purchaser.
Ensuring that CA’s are dealt with effectively in the heads of terms, in accordance with the agreed wishes of the parties.
Help draft the replies to CPSE’s.
Drafting of clauses in the purchase agreement to ensure compliance with the provisions of s187A and so that the CA’s are properly passed on to the purchaser.
Prepare the s198 election to pass on the CA’s to the purchaser at the agreed value.
Early review of a proposed project to ensure all the Capital Allowances issues are considered from the outset and the highest claim value and tax benefits are achieved. This includes for example reviewing the proposed services installations to highlight the potential to claim Enhanced Capital Allowances on energy efficient or water saving technologies.
Detailed analysis of the project expenditure to ensure your clients achieve their full entitlement to CA’s. We are able to do this even in cases where there is very little detailed information on the building costs available.
Correct allocation of qualifying expenditure to the appropriate pool so that it attracts the highest possible claim rate. We are also able to identify whether other forms of tax relief, such as Land Remediation Relief (LRR) might also be available.
Ensuring that the expenditure is categorised properly between revenue and capital, where appropriate, so that the immediate tax benefit is maximised. At the same time we would consider the availability of any initial or enhanced first year allowance relevant at that time.
Using our construction knowledge, in conjunction with our detailed understanding of the how particular sections of The Act are targeted at specific types of expenditure, to capture any incidental expenditure, such as lift shafts, that might be allowable under CAA 2001 s25 making sure all items claimed are in accordance with case law and current HMRC guidelines.
We are also able to identify whether other forms of tax relief, such as Land Remediation Relief (LRR) might also be available.
Modelling which type of lease incentive is most appropriate in any given set of circumstances.
Ensuring that any CA’s due on any fit-out works are vested in the intended party.
Analyse the fit-out costs to ensure that the value of any CA’s available within these works are maximised, whilst also ensuring that the CA’s are allocated between the parties in the optimum way.
A new form of capital allowance was introduced on 29 October 2018 for new expenditure on structures and buildings (for non-residential use only). This was initially set at 2% per annum over a 50 year period but was increased in April 2020 to 3% per annum.
The project expenditure must be analysed to exclude non-qualifying costs and an ‘allowance statement’ prepared to provide evidence of the relevant interest, timing of expenditure, the amount of qualifying expenditure and date of first use.
There are many properties on which CA’s have not yet been fully claimed or claimed at all. It may still be possible to make a claim on these properties even if the expenditure was incurred many years ago.
Under rules introduced from April 2014, the seller must now pool any qualifying expenditure before disposing of a property – otherwise the allowances could be lost forever. It is, therefore, often best practice to prepare a valuation on any qualifying expenditure as soon as possible while there is a greater chance of collating the supporting information.
For more information on any of the above or if you like to speak with one of our directors, for an initial no-obligation discussion, please call us on 03300 889 668
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