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Case Law – Mersey Docks & Harbour Company v HMRC

HMRC continue to raise enquiries and to disallow items of plant that could be used for a claimant’s trade. This case relates to the quay wall at the Port of Liverpool

14 Jan 2025

Written by: Clive Curd

Case Law – Changi Airport Loses $273m Tax Break

Changi Airport Group (CAG) made Capital Allowances claims over three years totalling $272,575,162 on assets including the runways and taxiways but lost with the Court of Appeal determining that the assets were structures and not tools of trade.

20 Dec 2024

Written by: Tom Lo

Furnished Holiday Lets – HMRC Clarify Legislation

The window to claim Capital Allowances tax relief on furnished holiday lettings (FHLs) is fast decreasing before repeal of the legislation in April 2025 and HMRC have now clarified the transitional rules about who can or can't claim.

07 Nov 2024

Written by: David Gibson

Archive

 

Latest News

Case Law – Mersey Docks & Harbour Company v HMRC

14 Jan 2025

HMRC continue to raise enquiries and to disallow items of plant that could be used for a claimant’s trade. This case relates to the quay wall at the Port of Liverpool

Case Law – Changi Airport Loses $273m Tax Break

20 Dec 2024

Changi Airport Group (CAG) made Capital Allowances claims over three years totalling $272,575,162 on assets including the runways and taxiways but lost with the Court of Appeal determining that the assets were structures and not tools of trade.

Furnished Holiday Lets – HMRC Clarify Legislation

07 Nov 2024

The window to claim Capital Allowances tax relief on furnished holiday lettings (FHLs) is fast decreasing before repeal of the legislation in April 2025 and HMRC have now clarified the transitional rules about who can or can't claim.

New Case Law – Capital v Revenue

04 Oct 2024

A recent important Supreme Court decision in Centrica Overseas Holdings Limited v HMRC addresses the deductibility of expenses incurred by a company. The bar to deduct costs has been raised considerably

HMRC To Increase Scrutiny on Capital Allowances Claims

04 Oct 2024

Not only are Allowances more advantageous than ever before, but HMRC are strategically targeting tax leakage – including through Capital Allowances. Getting the correct advice is essential

100% Full Expensing – What is it and why it’s important

09 Sep 2024

Hailed as the “Greatest Tax Break in History” when it was introduced in 2021, the 130% Super Deduction aimed to take some of the sting away from the hike in Corporation Tax rate that was announced in the same speech. Its replacement, Full Expensing (FE), took over in April 2023 as a slightly less headline-grabby 100% First Year Allowance. But what is it?

Some Good News for Furnished Holiday Let Owners

05 Aug 2024

Positive transitional rules have now been published allowing Furnished Holiday Let owners the ability to use Capital Allowances beyond April 2025

Case Ruling – HMRC v Altrad Services Limited

10 Jul 2024

The decision by the Court of Appeal will have far reaching implications in that it clearly resets the boundaries of what is a capital allowances avoidance scheme designed to increase the quantum of capital allowances claimed

Spring Budget Update

06 Mar 2024

Chancellor Jeremey Hunt announces changes to the capital allowances legislation affecting furnished holiday let owners

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.