2018 will see the first wave of targeted legislation to “green” our existing building stock. We look at the “cash back” opportunities for some of the options to address these new requirements.
The discussion of how to “green” buildings has been long in the making and new legislation is about to hit landlords from 1st April 2018. In short, if you are granting a new lease or renewal of an existing lease, then the new Minimum Energy Efficiency Standards (MEES) will make a property with an EPC rating of below an ‘E’ unlawful. In special circumstances, landlords will be given an extension of six months to comply from the date of granting the lease. The regulation applies to all non-domestic buildings except those that do not require an EPC under current regulations such as listed buildings. This phase precludes the full application to all leases including those existing which is due to apply from 1st April 2023.
The question for landlords is to consider how best to address any shortfall in the EPC rating. The answer will be driven largely by the long-term plans for the property which may be to either adapt a light touch approach or to incorporate the works as part of a wider asset management initiative if the property is to be repositioned in the market.
Typical options which will be considered includes the replacement of the old fluorescent type lighting to more energy efficient LED lighting. Or a more expensive option would be the replacement of windows and or cladding to a more superior insulated version.
Both options will attract Capital Allowances which provide a helpful “cash back” to the cost of addressing the energy efficiency of any building. For certain works, the availability of Enhanced Capital Allowances (ECAs) will provide 100% tax relief in the year of expenditure, so as a 20% tax payer for every £100,000 incurred, £20,000 will be recovered.
Veritas Advisory provide early tax planning advice on all types of building refurbishments and to obtain an estimate of the available tax relief please contact one of our directors.