Here are a few observations Capital Allowance Review Service has collated together that form part of their property expenditure reviews...
Observations
-
Introduction of Investment Zones
These Investments Zones will have tax reliefs and other benefits that will encourage rapid development and business investment. To initiate this, there will be a 100% first-year enhanced capital allowance relief for plants and machinery used within specific sites. This will be accompanied by Enhanced Structures and Buildings Allowance relief that will allow businesses to reduce their tax liabilities by 20% per year. Further details on these are still to be announced.
-
Annual Investment Allowance (AIA)
The current year allowance which became £1,000,000 on 1 January is now set at that rate for the foreseeable future, as confirmed in the Chancellor’s Autumn Statement on 17 November 2022. As a result, property expenditure must be reviewed in a timely manner to avoid the full AIA being lost, and good planning on the timing of expenditure can ensure that AIA is used to its maximum advantage. For example, a capital project in one year costing £1.5m can be spread over two financial periods to maximise the £1m AIA available in each period.
-
Structural Buildings Allowances (SBA)
SBA aims to relieve the costs of physically constructing new structures and buildings that are intended for commercial use. This includes the necessary work to bring them into existence and the improvement of existing structures and buildings. SBA often applies to expenditures where no other allowances are available.
SBA has been available for expenditure incurred on or after 29th October 2018 with a current rate flat rate of 3% over 33 and 1/3 years.
It should be noted that SBA does not affect Annual Investment Allowance, and it should be pointed out that if you own the property SBA works as an acceleration of tax savings, but may potentially be claimed back via the corporation tax/capital gains tax computations should the property be sold.
-
Research and Development Allowances (RDA)
RDAs are often confused with Research and Development Tax Credits, but are very different and provide additional tax savings to those that carry out research and development. RDA is a tax relief for businesses in the UK and provides a generous 100% first-year tax relief for fixed asset capital expenditure carried out by trading companies, individuals, and partnerships. Although it does have the time restrictions of a first-year allowance that can only be claimed in an open year, it can be a great alternative to SBAs. It can also be used as an alternative to AIA removing the limitations of the AIA threshold.
-
Special Rate Pool First-Year Allowances
This applies to expenditure on electrical and heating systems, for example. The allowance is 50% of the cost, but should only be claimed if you have exceeded the Annual Investment Allowance limit of £1,000,000.
How the process works
-
Step one
Capital Allowance Review Service has been a trusted capital allowances consultancy firm for accountants for over 20 years. With their support & guidance, accountants across the UK can identify clients that can benefit from a property capital allowance review. This is typically those that have spent capital buying or improving commercial property.
Your clients’ plans are important – if they have paid tax or are expecting to pay tax, if they have spent capital buying or improving commercial property, or are in the process of selling, then a review should be considered.
They work in conjunction with you, your client, or both to establish if a claim is available and worth pursuing. Using their experience, they will produce a proposal showing the approach and potential value of capital allowances their process would achieve. Crucially, they also indicate how a client’s tax profile will benefit and set out the fees.
If their team of experts secures unclaimed capital allowances, the client will typically be charged a percentage of the secured claim, but if nothing is found, there are no fees.
-
Step two
Once the potential for a claim has been established, the process of calculating the claim is started. Capital Allowance Review Service will carry out a survey of the property and take an inventory of everything in, on, and around the premises. Their team of chartered accountants, tax specialists, qualified surveyors, valuers, and property experts will assess every aspect of the claim.
-
Step three
The claim is now applied to the client’s tax profile. If applicable, Capital Allowance Review Service will amend any previous tax returns and apply to HMRC for any relevant refund. Alternatively, the claim can be passed to your accountant for inclusion in tax returns. The team will also liaise with the accountant in corresponding with HMRC if required.
-
Step four
Once they are happy that the claim has been processed in the manner expected, which may include waiting to see that HMRC has processed any amended tax returns as expected, Capital Allowance Review Service will then produce a final report, which shows how the figures have been calculated and include copies of any amended tax returns. Frequently, the client recovers enough tax to cover their fees immediately. If this is not possible, this is made clear at step one before the claim process starts.
If you would like support with capital allowances then please get in touch with our expert team!
Latest News
-
1 October 2024
Our Founder, Paul Roberts, Retires From CARS
Over 25 years ago Paul Roberts founded our company and created the successful firm it is today. It is with mixed emotions that we announce Paul’s retirement from Capital Allowance Review Service (CARS). While we will miss his leadership and unique sense of humour, we recognise that he deserves to spend... -
12 September 2024
The High Cost of Overlooking Capital Allowances
Understanding tax benefits and capital allowances is crucial in the world of property investment. Overlooking these aspects can result in significant financial losses. This article explores a real-life case where a couple’s lack of knowledge and expert advice led to a costly mistake. Early involvement...
Contact Us
Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.