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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.

Recent updates to the Carbon Trust Enhanced Capital Allowances (ECA) system may only represent minor tweaks but maintain a significant cash boost for the investment in a wide variety of property assets, from boilers and lighting to rainwater harvesting.  This often forgotten cash back government incentive, if considered at the outset of any construction project, can significantly reduce net project costs.

The Carbon Trust’s Energy Technology list (ETL) https://etl.beis.gov.uk/engetl/fox/live/ETL_PUBLIC_PRODUCT_SEARCH details all assets on which ECAs can be claimed against, with the big-ticket expenditure items being:

  • Lighting
  • Chillers
  • Boilers
  • Lighting and HVAC controls
  • Air conditioning units
  • Pipework insulation
  • Energy monitoring
  • Water saving technology

Once you have identified that your project includes some of these assets, the product selected then must meet the specific performance criteria set for that asset category.  This is often where the claim process falls down, as it will require that product to either be listed or certified as compliant by the individual supplier at the time the expenditure is incurred.  Collating the necessary information is not straightforward and retrospective claims especially are unlikely to be as successful, if picked up at all, particularly if left to the accountant to address 12 to 18 months after the project’s completion.

The benefit for partnerships and individuals is every £100,000 spent on ECA qualifying assets, provides £45,000 cash back in the form of tax relief in the year that it spends the money (£19,000-20,000 for companies).  Veritas Advisory advised on a recent £1m office refurbishment for a firm of lawyers and identified £300,000 of ECAs which represented a £135,000 reduction in the Partners tax return for that year; the increased energy efficiency and potential rental uplift providing further reward.

Claiming ECAs is not an automatic benefit; the key point is that it must be demonstrated by the tax payer that they have the entitlement to make a claim at the time they incurred the expenditure.  Veritas Advisory have an ECA process where by working alongside the project team we liaise with the suppliers to assess the ECA status at the time of procurement and if necessary, facilitate the product listing or certification required to make a claim.

If you would be interested in finding out more about how Veritas Advisory could assist in this area, then please contact one of our Directors (https://www.veritasadvisory.co.uk/about-us/).