Establishing a potential claim
Our client owned an apartment block that hosted long-term tenants. In 2010, our client spent £850,000 acquiring the communal areas of the building and wanted to understand whether a capital allowance claim was possible.
After getting in touch with us, we followed our process to assess what was included with the purchase of the communal areas and this involved reviewing the following:
- History of property ownership,
- Assessment of prior claims,
- How the clients held the asset,
- How the expenditure had been treated,
- What activity was being carried out,
- The client’s current and forecast future tax position,
- And, the client’s future plans with regards to this property.
Once this initial review has been completed, we were then able to provide the client with a bespoke forecast illustration showing the estimated tax savings that could be achieved via a full review.
What PEFFs were discovered that may have been missed? We found the communal areas contained lighting, heating systems, fire alarms, health & safety systems, lifts, all of which wouldn’t have been picked up through normal accounting routines.
What were the results
We helped to uncover £372,250 of unclaimed property embedded fixtures & fittings that qualified for tax relief via capital allowances, equating to 44% of the client’s purchase costs. When the claim was applied to the client’s tax profile, this secured a total tax saving of £148,900.
What challenges arise with these claims?
We firstly need a clear understanding of the history of ownership and prior claims by previous owners in order to satisfy CAA2001 s185. This is key as capital allowances can only be claimed once on any given item. The required due diligence is often extensive and requires expertise in property law, accounting & tax as well as specific capital allowance legislation relating to the property.
For personally-owned assets, and capital allowances that are applied to an individual’s tax affairs, one of the main considerations we confirm before progressing the practicalities of calculating a claim is to confirm exactly how a claim would impact a client’s personal tax profile. Unlike Limited Companies, capital allowances cannot be applied to all taxable income or profits/gains.
How our services benefited the client
Essentially, once the property law, accounting, and tax disciplines have been applied to a clients’ position to confirm an approach is possible, a survey and an expert evaluation of the PEFFs within the property enabled us to discover unclaimed tax savings. Without having this routine when establishing capital allowances, the PEFFs will go undiscovered, resulting in large amounts of tax savings being missed and potentially lost.
Our Managing Director, Chris Roberts, gives his opinion saying…
“We frequently come across scenarios where it is wrongly assumed Capital Allowances are not available. A good example of this is when a property carries out a residential function such as an apartment block, large purpose-built HMO’s, student accommodation etc. Although Capital Allowances are often heavily restricted against properties of this nature, we encourage clients and advisors to discuss build projects and property acquisitions to determine if & how tax savings may well be available.”
5 December 2023
Capital Allowances ManualCapital allowances play a significant role in taxation. Allowing businesses to claim deductions for the depreciation of their assets. Among these assets, plant and machinery are frequently mentioned. However, the term “plant and machinery” is not explicitly defined in tax law. It should also...
22 November 2023
Autumn Budget 2023: Changes to Capital AllowancesThe Autumn Budget of 2023 has arrived, and with it comes significant changes and developments the government has put in place. Chancellor Jeremy Hunt delivered the statement on Wednesday, 22 November 2023. For businesses and individuals alike, these adjustments in tax policies can have far-reaching implications.
Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.