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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.

Abstracting an additional benefit on sale can often be overlooked when it comes to marketing on any unclaimed Capital Allowances.  Here we set out the circumstances when this should be considered and how to go about it.

The position adopted for Capital Allowances on the sale of a property is largely dependent upon the extent that the entity can claim itself.  For non-tax paying entities such as developers who hold the property as trading stock or pension companies and who cannot claim, they are able to market on the benefit of any unclaimed Capital Allowances at the point of sale.

For a company, individual or investor they have a choice, which revolves around whether they are better off retaining the unclaimed benefit or to market it onto a buyer.  It should be noted that even where no prior claim has been made, then there is still the ability to submit a claim with an amended tax return before completing on the deal.

The structure of the holding entity can also dictate the best strategy to adopt.  For an entity or individual which will still have an alternate income post sale of the property, then the legislation provides the ability to elect to retain the unclaimed allowances, by entering into a section 198 election with the buyer within 2 years of completion.

As a side note, it is one thing making adequate contract provision to enter into a section 198 election, but if an executed version is not submitted within 2 years, then you could face clawback of the relief or being found in breach of contract.  The task of submitting the election all too often falls between the lawyer, accountant and client, so knowing who is responsible for this task is critical.

Conversely, if the property is held within an SPV, then with no future income it would often be beneficial to pass on any unclaimed Capital Allowances.  This ideally should be raised within the heads of terms, in order that a value can be extracted on sale and whilst there is no direct correlation to achieving a higher sale price, by bringing it to the table, it will always help with negotiating the best deal.

With new rules introduced in 2014, the unclaimed Capital Allowances needs not only consider the sellers own expenditure in terms of entitlement to claim, but also that of past owners.  Sellers can often make claims on a previous owner’s past expenditure, whether that be an acquisition or refurbishment.  Any such unclaimed allowances should be identified and either claimed, marketed across or a combination of the two.

Veritas Advisory offers a service to prepare market sheets to quantify unclaimed Capital Allowances for heads of terms.  Please contact one of our directors should this service be of interest.