2. Is this a scheme or loophole?
• Capital allowances date back to 1870’s
• Capital Allowances Act 2001
• Decades of case history
• Interpretation is constantly refined
4. Profit & Loss Account
Sales £ 1,100,000
Cost of Sales £ 600,000
Gross Profit £ 500,000
Expenses
Wages £100,000
Repairs £ 50,000
Marketing £ 50,000
Gas £ 25,000
Electric £ 25,000
Other £ 50,000
£ 300,000
NPBT £ 200,000
5. Applying Capital Allowances
Net Profit Before Taxation £200,000
Capital Expenditure on Plant & Machinery £50,000
Main Rates Pool £50,000 (WDA 18%)
Annual Investment Allowance £25,000
Capital Allowances Available = £25,000 (AIA)
Main Pool
£50,000 - £25,000 = £25,000 x 18% = £4,500
Capital allowances available in the year £29,500
6. Tax Benefit
Net Profit Before Taxation £200,000
Capital allowances available £ 29,500
Pays Tax on £170,500
Tax saving @20% tax would be £4,900
@40% £9,800
7. What is capital expenditure?
Brings into existence (or improves) an asset
with an enduring benefit to the trade.
(British Insulated & Helsby Cables v Atherton)
8. Plant & Machinery (P&M)
• Machinery has the ordinary meaning you
would expect.
• Plant
– Could include any asset that is used in the
business of the taxpayer that supports the trade
and is not trading stock or the premises in which
the trade is carried out.
9. Examples of Plant
Electrical Systems Sani t ar y W e
ar
COLD WATER SYSTEMS Heating Systems
Ventilation Moving Walkways
Lifts
Escalators
Thermal Insulation External Solar Shading
Kitchen Equipment Signage Art Work?
Safety Equipment Electronic Barriers
Artificial Turf
CCTV
BIKE RACKS FIRE ALARMS & SPRINKLER SYSTEMS
Beehives FREEZERS AND FRIDGES Aerials
Floodlights
Movable Partitions
ASSOCIATED COSTS COLD STORES
Sound Equipment
MEZZANINE FLOORS SUPPORTING PLANT
10. How does this apply to Commercial Property?
• New Build / Refurbishments / Extensions
• Second hand freehold purchases:-
No Time limit on making a claim
Claim for original purchase and improvements
• Leasing
Claims for major refurbishments / extensions
ALL COMMERCIAL PROPERTY THAT IS OWNED WITH THE INTENTION
OF MAKING A PROFIT ON WHICH TAX WILL BE PAYABLE. INCLUDES
FHLS BUT NOT RESIDENTIAL PROPERTY SUCH AS BUY TO LETS.
11. Why it’s worth making a claim?
Retail / Offices
Purchased 2008 - £1.25m
Capital Allowances - £302.5k
Tax Benefit @ 40% - £121k
Immediate Saving was £27k
Furnished Holiday Let
New Build 2007 - £630k
Capital Allowances £254k
Tax Benefit @ 40% £116k
Immediate Saving was £25k
12. Why do claims not get made?
Solicitors:-
- CPSE1 Form - Section 19
- S198 Election Agreement
Accountants Misconceptions:-
- Chattels claimed but not fixtures / integral features.
- Purchasing contract binding on parties
- Capital allowances claims effect CGT on sale
- Claw-back of benefit at later date
13. What does the future hold?
• Post April 2012
- Pooled expenditure
- S198 Agreement
- First-tier Tribunal
• Post April 2014
- Pooling requirement
- S198 Agreement or first-tier tribunal
- Entitlement lost for all.
14. Which capital allowances claims company?
- At least one or two partners are dual qualified as :-
+ or
- No Claim = No Fee.
- Initial High Level Review.
- They take responsibility for the final report not the
accountant.
