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Capital Allowances Incentives to Increase?

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

23 Mar 2022

Written by: David Gibson

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

02 Nov 2021

Written by: Nolan Masters

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

18 Oct 2021

Written by: David Gibson

Archive

 

Latest News

Capital Allowances Incentives to Increase?

23 Mar 2022

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

02 Nov 2021

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

18 Oct 2021

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

Veritas Supporting Charitable Causes

01 Oct 2021

We have chosen to support four charitable causes reflecting activities that are close to us and to people we know and would like to raise awareness of.

Using Artificial Intelligence for Capital Allowances

27 Sep 2021

Can Artificial Intelligence help claim capital allowances? In addition to preparing detailed claim reports for clients, Veritas Advisory, in partnership with Brunel University and Innovate UK, are applying technology to solve some of the issues, the main one being how to use data efficiently and correctly.

New Case Law – Potato Store is Plant

07 Aug 2021

JRO Griffiths Limited v The Commissioners for Her Majesty’s Revenue and Customs [2021] UKFTT 257 (TC) resulted in the taxpayer winning their appeal in whether or not a warehouse used to store potatoes for a crisp manufacturer is plant.  The taxpayer won on 2 counts.

Estates Gazette Article – Capitalise on Allowances

20 Jul 2021

Veritas Advisory Director Nolan Masters, together with Alex Barnes a Partner at BDB Pitmans LLP, have published an article in Estates Gazette on how capital allowances claims can mitigate the increasing cost of tax on property investment.

New Case Law – Satellites

16 Jul 2021

A Capital Allowances case Inmarsat Global Limited and The Commissioners for Her Majesty’s Revenue and Customs UT/2019/0167 V), has been refused by the Upper Tier Tribunal, in relation to the launch of satellites.

Taxation Magazine Article – The New Super Deduction

04 Jul 2021

In the June edition of Taxation Magazine Veritas Advisory Director Nolan Masters set out how the new super deduction and special rate allowances will affect property owners, occupiers and investors. Click here to read the article in full

In an age of shared developers risk, differing tax rates and income driven returns, which party takes the benefit of Capital Allowances can often be a forgotten factor.  Here we explore the key points to consider as to who can claim Capital Allowances on developments. The legislation provides for the possibility that anyone can claim Capital Allowances providing that you satisfy three key requirements.

Firstly, that you can demonstrate that you have incurred capital expenditure, which is simply paying for works which qualify.  For most development projects, this will include expenditure on, but not limited to items such as heating, air conditioning, electrical systems, lifts, furniture, fixtures and fittings.  To the extent that the expenditure is to be met by a third party, say in the form of grant funding, that expenditure must be treated as non-qualifying for Capital Allowances.  In such scenarios, early tax planning around what expenditure is being paid for and by who, will limit the reduction to any claim.  It should however be noted, that the way in which a development is to be financed does not affect the ability for a Capital Allowances claim to be made.

Secondly, that the person or entity paying for those works must have an interest in the land on which the qualifying fixtures are to be installed, which is typically a freehold; however, often overlooked is that it applies to all leases, so tenants or traders can claim as well as landlords.

The final requirement is that there is the intention to retain those qualifying fixtures and for them to be used in your business or trade, either as an individual, partnership, company or as property held by an investor.  Conversely, if your intention is to develop a property and to then flip it on, to the extent that the property is held as trading stock, Capital Allowances cannot be claimed.

Businesses or investors based in the UK claiming Capital Allowances reduce either the amount of corporation tax payable by a company or income tax by an individual or partnership.  If the individual, company or business is based offshore and registered outside the UK, then they too can claim Capital Allowances as all income remitted off shore is subject to withholding tax payable at 20% in the UK. As Capital Allowances is a form of tax relief available against certain qualifying property expenditure, for an entity to benefit they must be subject to tax.  So certain non-tax paying entities such as UK pension funds (note some offshore pension funds are still subject to tax), registered charities and government bodies do not claim, as there is no benefit to do so.

For properties held within tax transparent vehicles, such as REITs (Real Estate Investment Trusts) and PAIFs (Property Authorised Investment Funds), the tax charge is on the investor not the landlord, however the respective governance requires that Capital Allowances are still claimed where there is entitlement to do so, under a shadow tax regime.

A key point that can often be overlooked, is that even where a business or investor held development is in a loss-making position at the time they embark on a project, the entitlement to claim Capital Allowances still exists.  Furthermore, in most cases it is beneficial to still claim in the year of expenditure as the allowances can be disclaimed and rolled forward to future years.  This provides businesses and investors with a valuable insurance policy in future years, when taxable income may become due.

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