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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.

As the year nears its completion, we set out some key tasks to deliver an enhanced return on your property investment or to act as a compliance check list for your year end reporting and tax submissions.

The first “To Do” is for any property asset purchase completed after April 2014, for clients and their accountants, to ensure allowances are not being lost altogether. Here we run through some basic scenarios and highlight the actions required.

With the introduction of new rules, CAA 2001 S187A, for a purchaser to take the benefit of any unclaimed Capital Allowances they must now obtain a s198 election within two years of completing on the deal.  We are increasingly seeing potential claims being forgone because clients and their advisors have forgotten or not realised that they can go back and address.

“To Do”

  • Check s198 elections submitted for deals completed post April 2014
  • If contract is silent you can still go back to quantify the unclaimed allowances
  • Can potentially give rise to a “cash back” by submitting the claim typically going back up to two years
  • Often irrespective of the contract position, entitlement to claim Capital Allowances can still arise which do not require any election

Here we explain two typical scenarios that we often see:

Scenario 1 – Contract is Silent

Often a contract of sale can be silent for Capital Allowances and often clients and their advisors will look no further, however, our recent experience has shown that whilst Capital Allowances may have been overlooked at the time of purchase, that there is still a window of opportunity to go back and make a claim.  To do so you would first have to check your entitlement to claim, which a specialist advisor can determine, then you need to approach the vendor to agree to fix the value of Capital Allowances by entering into an election.  Whilst it is advisable to have cooperation clause written into the contract of sale, we find in most cases that vendors are still willing to sign up to elections post completion.

If you complete on acquiring a property on say the 2nd January 2015, you would have until 2nd January 2017 to register the election with HMRC as per CAA2001 S200/201.  Noting if the elected value is not already stated in the purchase contract, it will require the quantum of unclaimed allowances to be calculated before submission.

Scenario 2 – Vendor not Claimed as a Non-Tax Payer

The new Capital Allowance rules, under S187A on transactions, apply where the vendor is in the charge to tax and therefore, if the vendor was a non-tax paying entity to the extent there is no prior clamant, the purchaser will have the entitlement to submit a claim.  There can be confusion around this point and there are several scenarios that can arise, but in essence if you have acquired from a pension fund, charity or government institution or the vendor held as trading stock, then the new rules allow you to ignore that past owner and go to the next.

You would still have to confirm that no previous “owner” had claimed (CAA2001 S185/S186) on any of the existing fixtures and whilst in some cases a past claim may have been made, there are in most cases still opportunities to claim Capital Allowances dependent upon the timing of the expenditure, but for which no election is then required.