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Capital v Revenue – Understand The Risks v Benefit

As we are fast approaching the self assessment filing deadline for individuals and the amendment window for corporate entities with a year end of March, understanding the importance of what constitutes capital or revenue expenditure, and the risks and benefits associated with it, is extremely important.

24 Jan 2024

Written by:

First Year Allowances for Corporate Members of Partnerships

In a positive move HMRC have updated their capital allowances guidance for partnerships stating that partnerships with underlying corporate partners can claim first year allowances

19 Jan 2024

Written by: Abu Choudhury

Substantial Unclaimed Capital Allowances On Existing Assets

Capital Allowances provide an opportunity to save substantial amounts of money in a lean market yet many property owners and occupiers are already sitting on vast savings without even knowing it.

23 Oct 2023

Written by: David Gibson

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Latest News

Capital v Revenue – Understand The Risks v Benefit

24 Jan 2024

As we are fast approaching the self assessment filing deadline for individuals and the amendment window for corporate entities with a year end of March, understanding the importance of what constitutes capital or revenue expenditure, and the risks and benefits associated with it, is extremely important.

First Year Allowances for Corporate Members of Partnerships

19 Jan 2024

In a positive move HMRC have updated their capital allowances guidance for partnerships stating that partnerships with underlying corporate partners can claim first year allowances

Substantial Unclaimed Capital Allowances On Existing Assets

23 Oct 2023

Capital Allowances provide an opportunity to save substantial amounts of money in a lean market yet many property owners and occupiers are already sitting on vast savings without even knowing it.

The Risk to Lawyers of Not Correctly Addressing Capital Allowances

23 Oct 2023

Solicitors acting for clients on a purchase or disposal of a commercial property must ensure they correctly address capital allowances; failure to do so may give rise to reputational and / or financial risk.

Maximising Capital Allowances and Avoiding Pitfalls Through Timing

23 Oct 2023

The rules surrounding the transition between Super Deduction and Full Expensing can be complex and the importance of fully analysing and understanding any contract for construction or purchase is significant.

Use Capital Allowances to Help Pay for Higher Spec Offices

23 Oct 2023

On a typical £1m CAT B fit out the landlord or occupier, whoever is incurring the expenditure, could recover up to £250k by claiming Capital Allowances.

HMRC Capital Allowances Enquiries Focusing On Certain Sectors

26 Sep 2023

An increasing number of claims being submitted to HMRC are not fully compliant with the legislation, and in some cases are double what they should be, particularly in certain industry sectors.

Unearthing Hidden Treasures – LGT Wealth Article

01 Sep 2023

Veritas Director David Gibson was recently interviewed by Nicholas Duffy of LGT Wealth Management for thoughts on how family offices and property owners can identify Capital Allowances to help leverage other investments. Click here to read in full

Offset ESG Costs With Capital Allowances

09 Aug 2023

The impact of both ESG and MEES on the property sector is resulting in significant capital investments. To incentivise and reduce the net cost of capital investment, tax relief is available by way of capital allowances.

If you have vacant space and planning on incurring expenditure, Business Premises Renovation Allowances (BPRA) offer investors a significant increase in returns by providing 100% tax relief in the year of expenditure on bringing the space back into use, but the expenditure must be committed before its expiry in April 2017.

When Alistair Darling announced the introduction of a new 100% tax relief for vacant buildings from April 2007 there was little take up.  George Osborne announced its extension in 2012 for a further 5 years and with investor confidence returning, the number of BPRA qualifying claims has steadily increased.  In recent years, there has been some negative press around the use of certain targeted BPRA schemes, detracting from what is good about this tax relief, which is in essence to offer investors a sizeable tax incentive to encourage investment in vacant or part vacant property.

When does it Apply

To attract the tax relief there are a number of criteria that have to be met in order to qualify, including:

  • Own a commercial property
  • Has been empty (building or floor) for a minimum of 12 months
  • Located in an assisted area
  • Incur capital expenditure
  • As a result the building is brought back into commercial use
  • Hold property for 5 years post expenditure

The Benefit

BPRA provides a 100% tax relief on the subsequent capital expenditure incurred on bringing the empty building or floor back into use.  This attractive tax efficient wrapper has led to a large number of “change in use” conversions, particularly in the hotel sector, but can be applied to most commercial uses, but excludes residential dwellings.

An example of the benefit is demonstrated in a live case study of a £2.5m office refurbishment. Without the BPRA relief £1,6m qualified for Capital Allowances, providing a cash saving of £320,000 over a number of years. However, claiming BPRA across the full expenditure gave £500,000 of cash savings realised in the year of expenditure, providing a significant cash flow boost.

The Opportunity

If you own an empty floor or building in a qualifying location www.ukassistedareasmap.com factoring in the ability to attract 100% tax relief can greatly assist the feasibility of a scheme.  Noting that there is a minimum holding period of 5 years BPRA can significantly increase the return on your investment, but you will need to act soon before it is withdrawn for good.

If you are a client or have acted for a client who has purchased property, then please call one of our Directors who will provide a no fee review to assess the Capital Allowances position.