Build Magazine June 2015

Build Magazine 48 In April 2014 legislative changes kicked in that poten- tially rob CEOs of substantial tax relief known as capi- tal allowances, perhaps worth hundreds of thousands of pounds. However, it is not too late to claim! Capital allowances allow commercial property owners and many leaseholders to write off over time the cost of items (or assets) bought for use within a business against taxable profit. With all the new fixtures legislation from the Finance Act 2012 now in effect, if properties are not assessed and capital allowances pooled, recorded and transferred to the new owner when a premises is bought or sold, then the opportunity to claim is lost forever. It is estimated that property owners have already missed out on many millions of pounds of available tax relief. Of course some saw these changes as a move by the Government to erase part of the latent multibillion pound call on un- used tax relief and felt the treasury was working on a “they won’t miss what they never knew they had” basis. Because of their technical nature, these changes have had little coverage even though they affect thousands of transactions every year. However, a year later, if purchasers are advised correctly by a tax specialist they can still claim capital allowances in many instances, even when the vendor has made no previous claims or doesn’t know what capital allowances are. But to walk this road alone, unaware of the pitfalls, could mean the loss of all entitlement to allowances, potentially devaluing a property or leading to a surprise tax charge. Property sellers especially need to be advised correctly to protect themselves from the double risks they now face at the hands of a potentially tax savvy purchaser or even a claw back from HMRC. What can be claimed under capital allowances? Capital allowances relate to plant and machinery. The more obvious items that qualify include comput- ers, factory equipment, vehicles and office or kitchen equipment. How- ever, certain fixtures and integral building features may also qualify. This can include heating, air condi- tioning and cold water systems, lifts and even electrical wiring. Claiming on these is highly technical and outside the breadth of expertise of many accountants. This means property owners lose money be- cause they pay more tax than they need to. Property owners need to consult a tax specialist to get the most value from capital allowances. For chargeable periods that relate to corporation tax and begin on or after 1 January 2014, or that relate to income tax and begin on or after 1 January 2014, HMRC allows a 100 per cent ‘annual investment allow- ance’ (AIA) on the first £500,000. This can allow taxpayers to deduct up to £500,000 from their taxable profit. Previously set at £250,000, the AIA was doubled last year to stimulate business investment in the economy by providing an increased time-lim- ited incentive for businesses to in- vest in plant or machinery. From 1st January 2016 it is set to drop all the Capital Allowances: One Year On