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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.

When to claim Capital Allowances can often be overlooked on developments and so here we consider the timings and associated benefits of early tax planning around developments.

Capital Allowances are available to be claimed in the tax year in which the qualifying expenditure is incurred.  Let us take the example of a business or investor who develops an office building which they intend to hold.  The investor has say a 31 December tax year end and the development starts on 1 April 2017 running 12 months on site to completion.  Under most traditional forms of development, the main contractor receives milestone payments, usually monthly up to practical completion.

Whilst the building is not finished at the 31 December 2017 tax year end, 9 months of work have already been paid for and the legislation provides entitlement to claim Capital Allowances once the qualifying asset is a fixture to the building.  This enables an “interim” claim to be made at the 31 December 2017 based on the expenditure committed to at that point in time.

The claimant, then has a further 12 months in which to submit that “interim” claim as part of their annual tax return which falls due by 31 December 2018.  This provides the benefit of claiming one year of allowances, which would otherwise be missed out on if left to be claimed on completion of the development.

A further “final” Capital Allowances claim is then prepared and submitted in the following tax year in which the project completes.

In practice, many business and investors embarking on such developments will rely on their advisors to pick up Capital Allowances and often it can be reviewed months after completion or worse case, not at all.

For this reason, we inform clients that our preferred time to get involved in a development is as soon as the project has reached outline design stage.  By considering Capital Allowances at this time, it will enable them to be tax planned and claims maximised, by creating efficiencies to information flows and generating Enhanced Capital Allowances for the procurement of energy efficient plant & machinery, which provide 100% tax relief, as opposed to claiming the relief over a number of years.

The legislation does provide the ability to go back in time to make a claim on any historic development expenditure, albeit in the last open tax return, as opposed to when the expenditure was incurred.  If, however Capital Allowances are not considered at the outset of a development, this can often result in them not being addressed at all.

If the utilisation of the Capital Allowances and intended holding period of the asset is unknown. By simply quantifying and claiming the Capital Allowances at the time of the development, it will help to mitigate against any possible future tax liabilities and maximise the level of claim, at the time the information is readily available.

To discuss this article or if you have any general Capital Allowance queries, then please get in contact with one of our Directors.