3. What are Capital Allowances?
They are derived from expenditure relating to Commercial Property.
Over 100 years, rules are constantly updated and continue to be re-written today.
It is a ‘one off’ tax relief provided by the Government, it is not Tax Avoidance.
They are a valuable form of Tax Relief.
e.g. when you buy tables and chairs for an office, also when you buy the office building itself!
4. What are Capital Allowances?
The ‘Integral Features and its Intrinsic Fabrication’ of the commercial property….
And many more…
25%
5. Who Qualifies?
Every UK tax paying Commercial Property owner.
Paid more than £500k for their commercial property.
Is the buildings Capital Allowances history financially beneficial?
Free Historical Due Diligence
CPSE1 s198elections Tenancy Schedules Tax Computations
If so, we negotiate a fee.
6. Important Dates
1878- The origin of the current capital allowance regime was a wear and tear
deduction, based on the actual reduction in the value of Plant or Machinery (P&M).
1945- ‘Income Tax Act’ introduced a system of capital allowances to encourage post
war reconstruction, establishing concepts such as initial allowances, WDA’s, balancing
allowances and charges. For this time WDA’s for P&M were set at 25%.
2001- The ‘Capital Allowances Act 2001’ (CAA01) reformed the Legislation to make it
readily accessible for all.
2008- Introduced Annual Investment Allowance (AIA) at 100%, resulting in a special
rate pool for items classed within the CAA01, a great incentive for commercial buyers.
1st April 2008 to 31st March 2010 AIA-£50k
7. What is AIA?
2008- Huge amount of additions to the classification of
intrinsic fabrication of the integral features.
‘Embedded in the building structure, but essential to the business’.
1st April 2010 to 31st March 2012 AIA-£100k
Annual Investment Allowance is a Tax Accelerator designed to provide
commercial buyers a further incentive to purchase property.
AIA allows for a greater tax relief by increasing the first years
WDA from the standard 20%(avg) to 100%!
How is AIA beneficial?
8. What is AIA?
Purchase Price CA Identified AIA 1st Year Tax Relief CA Pool
£1,000,000 £250,000 £100,000 £20,000 £150,000
e.g. Based on a 20% tax paying Ltd company that paid £50k in corporation tax last year:
CA Pool Year WDA (20% avg.) S/L Tax Relief
£150,000 2nd £30,000 £6,000
£120,000 3rd £24,000 £4,800
£96,000 4th £19,200 £3,840
£76,800 5th £15,360 £3,072
1st 5 year Tax Relief £37,712
Remaining Tax Relief
(Over next 5 years)
£8,261
Total Tax Relief £50,000
Our Fee (4%) £10,000
9. Important Dates
2012- The Finance Act meant that the seller and buyer have a two year time limit in recognising
and accounting for fixtures, and the seller must pool its expenditure on fixtures within 2
years, otherwise the buyer may be restricted in the allowances he is able to claim in the future.
6th April 2012 to 31st Dec 2012 AIA-£25K / 1st Jan 2013 to 31st March 2014 AIA-£250k
April 2014- Mandatory “Pooling Requirement” and “Fixed Value Requirement (FVR)” means that
from this point forth, any vendor who could have claimed capital allowances but has not, must
have pooled the expenditure on the fixtures of the property by the time that the tax return is
finalised for the year in which the property was sold (maximum 21 months good grace).
Failure to satisfy the pooling requirement will result in the qualifying
expenditure incurred by the buyer being deemed as nil.
But, you do not want a lengthy Capital Allowances investigation to affect the sale, So…
If Capital Allowances are not discussed prior to point of
sale, all possible opportunities moving forward are lost!
AIA currently set at £500k
10. What does AIA mean today?
1st April 2014 to 31st December 2015 AIA-£500k
1st January 2016 onwards – AIA rumoured to be dropped to £25k
P/P Post April 2014 CA Identified AIA 1st Year Tax Relief CA Pool
£1,000,000 £250,000 £500,000 £50,000 £0
e.g. Based on a 20% tax paying Ltd company that paid £50k in corporation tax last year:
CA Pool Year WDA (20% avg.) Tax Relief
£250,000 1st £50,000 £10,000
£200,000 2nd £40,000 £8,000
£160,000 3rd £32,000 £6,400
£128,000 4th £25,600 £5,120
£102,400 5th £20,480 £4,096
1st 5 year Tax Relief £33,616
Remaining Tax Relief
(Over next 5 years)
£11,015.24
Total Tax Relief £50,000
Our Fee (4%) £10,000
CA’s without AIA?
11. Why use a Specialist?
For a comprehensive claim to be achieved you require a
RICS measured Plant Site Survey and a Bare Site Survey.
A commercial property owner can have confidence that their
Capital Allowances Valuation Report (CAVR) is HMRC compliant.
The client is assured that their claim is maximised, especially when
the new rules make it so easy to loose entitlement all together.
They will be insured and provide after the event advice to resolve any issues.
12. Why use a Specialist?
An Accountant - count up an Office’s PCs, servers and printers as allowances.
An Accountant - knows how to value a Hotel’s furniture and soft furnishings.
An Accountant - takes into account all gym and exercise equipment in Sports Centre’s.
A Capital Allowances specialist will include the floor boxes that
provide power and are embedded in the building structure, network
sockets and phone points as equally essential to the business.
A Capital Allowances specialist will know to include all those items that are
integral to the building which also contribute to the business, such as
thermal insulation (roof lining, draught exclusion, cavity wall insulation,
radiators) and fire safety (such as smoke alarms and fire extinguishers) as
well as all of the additional Integral Features.
A Capital Allowances Specialist will include items such as antiskid or sprung
floor surfaces, integral to the building but nevertheless essential for this type
of business and part of the cost of providing safe services.
13. Free Due Diligence Once we have undertaken our free feasibility study, ascertaining the
Capital Allowance history of the property, we will then provide you with an approximate
level of saving available to you, with the basis of our fees, should you wish to proceed.
Terms Agreed If you are happy with the proposal, our standard Terms of Engagement
letters will be issued and if required, we will engage with your solicitor and accountant to
verify your probable Capital Allowance position.
Plant & Bare Site Survey MRICS qualified surveyor will undertake a survey of your property
to identify the qualifying expenditure. A detailed Plant & Bare Site Survey report is then
provided to our Partners BDO LLP who can complete the HMRC compliant CAVR.
Final Report Provided The HMRC compliant CAVR will then be provided to both you and
your accountant outlining the level of tax saving available. Advice will also be provided as
to how the capital allowances are to be included within your tax return.
Review We will ascertain that your property/portfolio falls within minimum guidelines.
Our
Five
Easy
Steps
14. What have we learned?
The full claim can only be made once in the history of the Buildings ‘life span’.
It is the right of the commercial property owner to investigate the claim.
Now is a great time to buy commercial property as AIA is set at £500k.
The average claim makes up 25% of the purchase price of the property.
If CA’s are NOT identified in purchase contracts, all rights to claim are now lost!
To receive a HMRC compliant CAVR takes 2 – 6 months.
