Get your Money Back

According to recent research, more than £1.6bn in tax allowances related to property goes unclaimed each tax year.

Why is this?
Firstly, the cost of those allowances is estimated to have been £22bn in the 2016/17 tax year and at a time of Government austerity it isn't in their best interest to advertise that there's more tax relief available! Secondly, and probably due to the complexity of the issues involved, not all professional advisors have spent the time identifying all of the assets that qualify for the relief under what is known as the capital allowances system. For example, did you know that cabling, heating, lighting and security systems can be the subject of a claim? Did you also know that you can still make a claim for qualifying expenditure no matter how long ago you paid for it?

The capital allowances system allows commercial property owners to write off the cost of assets bought for use within their trade against taxable profits. At the moment the first £200,000 of any qualifying assets can be set-off against taxable profits immediately with the rest being written-off over a period of approximately 7 years.

In addition to the £200,000 Annual Investment Allowance or AIA mentioned above, there is a system of enhanced capital allowances available for energy saving and environmentally beneficial plant and equipment giving full and immediate relief for expenditure incurred e.g. energy efficient display cabinets.

For example, a food retail business with a fully integrated supply chain has a number of high street retail units either owned directly or under lease, decides to invest £400,000 to fit out those units. It is anticipated that 60% to 90% of the fitting out costs should be subject to a capital allowance claim.

Assuming an average claim rate of 75%, therefore, the capital allowances claim would be £300,000. Of this £200,000 could be claimed against current year profits using the AIA. If the other £100,000 was on the Energy Technology Product List or met the criteria for inclusion on that list, then this could also be claimed against current year profits.

Lastly, any retail units purchased that were owned by the sellers prior to 1st April 2008, will also be subject to a claim for capital allowance purposes under the “integral features” regime as these could not have been claimed by the sellers. It is imperative that the missives include appropriate wording so that the claim can be made.

So what can you do?

Firstly, you should get a suitably experienced advisor to undertake a review of the claims that should have been made.

Secondly, you should make sure that the claim maximises the most appropriate capital allowances available e.g. AIA and/or the enhanced allowances regime.

Lastly, if you're thinking about buying or selling your premises, please be aware that after March 2014, all claims for capital allowances must be formally notified to HMRC within two years of the transaction going through otherwise the ability to claim those allowances will be lost to you and all future owners. If you purchased commercial property after that date and appropriate action was not taken at the time, it is vitally important that you undertake that work now in order to avoid the loss of very valuable tax reliefs. If you're thinking of selling your business then it is probably best to start the process of making the claim now so that you are in the best place to maximise the tax value of those assets to the buyer without increasing your own tax bill.

Key points
• Capital allowances are under-claimed according to recent research
• Those allowances must be claimed or they will disappear following changes to the regime
• Time is running out to make those claims

Help is available from Cliff Fleming 01383 721421 or
e mail [email protected] 10 Abbey Park Place, Dunfermline.