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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

Capital Allowances can provide tax paying companies, individuals and investors (including overseas), with a significant investment gain by reducing the amount of tax payable against income.  In this article we set out the basic requirements that must be satisfied to secure this valuable tax relief when buying property.

For the buyer to take the benefit of claiming any unclaimed Capital Allowances, there are two key requirements that must now be addressed for the purchaser to have entitlement to claim Capital Allowances.

Firstly, the onus is now on the buyer to establish the level of claim available and to then agree a fixed value to which the buyer and seller agree to elect across on completion of the transaction.  The second is that the seller must reflect that elected value by simply pooling the allowances in their next tax return.

The ability to address the first requirement is the harder of the two, as this requires the buyer ascertaining from the seller to what extent, if any, have Capital Allowance claims been made.  Unfortunately, there is no readily available database of values to extract this information from, rather it relies on the due diligence undertaken by the buyer and their advisors.

However, knowing the tax paying nature of the vendor may give rise to a clearer path, whereby if the seller is non-tax paying, such as a pension fund or government body, then providing a statement of no claim is obtained, it removes the need to agree a value.  Rather it enables the buyer to claim on the seller’s expenditure and to look at any past owner’s expenditure.

The wording adopted in the heads of terms, replies to CPSE enquiries and sale contract wording dictates the legal position to determine the buyer’s eligibility to claim Capital Allowances.  Clients have missed out on claims having assumed that the matter had been dealt with, only to find there was insufficient or no legal provision on Capital Allowances, which is frustrating, when a simple challenge would have averted this loss of benefit.

Here at Veritas Advisory we can provide clients with a very quick comment or draft clauses, which will ensure that the purchaser can make a claim post completion.  It is worth highlighting that calculating the quantum of claim is not required at the time of completion, as there is a two year time frame in which to submit an election to HMRC.

Since a rule change in 2014, the strategy of picking up the Capital Allowances until after the deal is completed, is no longer an advisable strategy and can often give rise to clients missing out where they find they have agreed to a seller’s protective clause.  Or if the sale contract is silent, then being reliant on the seller’s goodwill after the deals completion, may be in short supply.

It is however worth pointing out that all is not lost, as even if the sale contract is silent or the buyer’s lawyers are told that there are no allowances available to the buyer, this does not remove the ability for the buyer to make a claim for Capital Allowances.  For example, if the buyer is the first to have entitlement to claim on qualifying fixtures after April 2008, then there will always be a claim based on the introduction of newly qualifying assets under the integral feature rules.

At Veritas Advisory we offer a due diligence service which raises enquiries of past owners on the buyer’s behalf, to assess their entitlement to past claims and in most cases with success.  For most properties, they have undergone many refurbishments over time and this expenditure will often not have been fully claimed against, which can give rise to new claims for our clients.

Should you wish to understand more about our due diligence service on buying property, then please contact one of our directors.