Within property transactions, capital allowances have often been treated as a bonus to be sorted out post-completion, rather than an issue be discussed even before heads of terms are agreed.
However, following the changes that came into force in April 2014, it is now essential that capital allowances are dealt with as an integral part of any transaction, if valuable tax relief is not to be lost forever.
For property disposals, identifying the value of any potential capital allowances from the outset can often help to market the full potential of a property. It also allows prospective purchasers with differing tax profiles to undertake a fully informed assessment of the property’s worth to them – potentially increasing the price they would be prepared to pay without that information.
Capital allowances are not just relevant on property acquisitions or disposals, but also on lease negotiations, fit-out works and refurbishment projects. Indeed, when budgets are tight the availability and potential value of any capital allowances can sometimes turn a marginal scheme into a financially viable one.
We work closely with surveyors, lawyers, accountants and their clients property transactions, offering expertise in negotiating and resolving beneficial solutions to issues relating to capital allowances, typically within tight time constraints.
We are confident we have the expertise and experience to assist you and your clients on a range of issues.
Ensuring that entitlement to capital allowances will be placed with the intended party when planning ownership structures. Facilitating a discussion of capital allowances on a fully informed basis so that their value can be factored into a tax efficient transaction.
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.
Interpreting and advising on seller’s replies to CPSE’s. This would include drafting supplementary questions where necessary.
Drafting of clauses in the purchase agreement to ensure compliance with the provisions of CAA2001 s187A and any CA’s are properly passed on to the purchaser.
Negotiating s198 values and allocation of expenditure between the two pools which can often produce added tax benefits.
Carrying out s562 apportionment of the total consideration for any assets on which no prior claim has been made, in accordance with statute, HMRC guidelines and VOA practice. This total consideration can often be more than just the purchase price.
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 CAA 2001 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.
Modelling which type of lease incentive is most appropriate in any given set of circumstances.
Ensuring that CA’s due on any fit-out works are vested in the intended party.
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.
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.
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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