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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.

2018 could see significant tinkering to the Capital Allowances legislation.  HMRC consulted on revamping the Capital Allowances system last November.  We look at what is being proposed and the potential impacts.

What is being proposed is a move away from the current “pooling” Capital Allowance system to an asset-based accounts depreciation approach.  Now you can be forgiven for having deja vu, as this suggestion has been raised and dismissed on several occasions in the past and so it does raise the question as to why we are here again.

The perceived benefit is that a doubling up of the accounting treatment of assets to match that of the tax treatment, will simplify the tax submission process for businesses.

This however, will not remove the need for businesses to allocate costs of individual assets to match the appropriate class of depreciation, which is a common gripe of the existing system.  That being said, the introduction of Integral Features did provide a more prescriptive list of asset heads which the vast majority of expenditure already falls under.  Equally, the Annual Investment Allowance currently provides £200,000 of tax relief in each tax year and so will cover the many smaller businesses typical level of annual capital expenditure.

Such a move would appear to have the usual winners and losers scenario, with the large infrastructure businesses with extensive asset inventories, the businesses to benefit the most, with added administrative burden for the numerous smaller businesses who currently don’t have to do segregated depreciation.  It would also allow tax relief to be claimed against currently non-qualifying expenditure, something which has not been seen since the abolition of Industrial Building Allowances (IBAs) back in 2011, when the entire property received some form of tax relief.  In a time when the Exchequers coffers are being squeezed, proposing an alternate system which will be more generous in giving tax relief seems an unlikely outcome of the review.

The current Capital Allowance system provides HMRC with a very flexible approach which it has used regularly to influence the investment into certain areas.  Recent examples include the Business Premise Renovation Allowance for investment in bringing empty buildings back into use and Enhanced Capital Allowances for investment in green technologies.  It is difficult to see how a deprecation-based approach would give the Government that same degree of flexibility.

The argument put forward that going into a low corporation tax environment reduces the need to have Capital Allowances does not recognise that it is the only way of incentivising investment in property.  In a post Brexit world, Capital Allowances can provide significant influence for businesses to invest and to change direction now would cause major disruption to businesses over what would be an inevitably prolonged transition period.

Veritas Advisory will continue to engage with HMRC and will provide updates in future newsletters or on our website www.veritasadvisory.co.uk